Correlation Between Enfusion and Vertex

Can any of the company-specific risk be diversified away by investing in both Enfusion and Vertex 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 Vertex into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enfusion and Vertex, you can compare the effects of market volatilities on Enfusion and Vertex 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 Vertex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enfusion and Vertex.

Diversification Opportunities for Enfusion and Vertex

0.88

Correlation Coefficient

Enfusion  Vertex

Very poor diversification

The 3 months correlation between Enfusion and Vertex is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Enfusion and Vertex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex 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 Vertex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex has no effect on the direction of Enfusion i.e., Enfusion and Vertex go up and down completely randomly.

Pair Corralation between Enfusion and Vertex

Given the investment horizon of 90 days Enfusion is expected to generate 1.79 times more return on investment than Vertex. However, Enfusion is 1.79 times more volatile than Vertex. It trades about -0.04 of its potential returns per unit of risk. Vertex is currently generating about -0.21 per unit of risk. If you would invest  1,011  in Enfusion on October 5, 2024 and sell it today you would lose (26.00) from holding Enfusion or give up 2.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Enfusion  vs.  Vertex

Enfusion

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enfusion are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Enfusion may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Vertex

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vertex are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Vertex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enfusion and Vertex

The main advantage of trading using opposite Enfusion and Vertex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enfusion position performs unexpectedly, Vertex 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 Vertex will offset losses from the drop in Vertex's long position.

The idea behind Enfusion and Vertex 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.