Correlation Between Enfusion and RenoWorks Software

Can any of the company-specific risk be diversified away by investing in both Enfusion and RenoWorks Software at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Enfusion and RenoWorks Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enfusion and RenoWorks Software, you can compare the effects of market volatilities on Enfusion and RenoWorks Software and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Enfusion with a short position of RenoWorks Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enfusion and RenoWorks Software.

Diversification Opportunities for Enfusion and RenoWorks Software

0.59

Correlation Coefficient

Enfusion  RenoWorks Software

Very weak diversification

The 3 months correlation between Enfusion and RenoWorks is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Enfusion and RenoWorks Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RenoWorks Software and Enfusion is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Enfusion are associated (or correlated) with RenoWorks Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RenoWorks Software has no effect on the direction of Enfusion i.e., Enfusion and RenoWorks Software go up and down completely randomly.

Pair Corralation between Enfusion and RenoWorks Software

Given the investment horizon of 90 days Enfusion is expected to generate 1.7 times less return on investment than RenoWorks Software. But when comparing it to its historical volatility, Enfusion is 1.07 times less risky than RenoWorks Software. It trades about 0.1 of its potential returns per unit of risk. RenoWorks Software is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  16.00  in RenoWorks Software on October 22, 2024 and sell it today you would earn a total of  3.00  from holding RenoWorks Software or generate 18.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Enfusion  vs.  RenoWorks Software

Enfusion

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enfusion are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Enfusion displayed solid returns over the last few months and may actually be approaching a breakup point.

RenoWorks Software

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RenoWorks Software are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, RenoWorks Software reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enfusion and RenoWorks Software

The main advantage of trading using opposite Enfusion and RenoWorks Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enfusion position performs unexpectedly, RenoWorks Software can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in RenoWorks Software will offset losses from the drop in RenoWorks Software's long position.

The idea behind Enfusion and RenoWorks Software pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.