Correlation Between Enova International and AFC Gamma

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

By analyzing existing cross correlation between Enova International and AFC Gamma, you can compare the effects of market volatilities on Enova International and AFC Gamma 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 Enova International with a short position of AFC Gamma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enova International and AFC Gamma.

Diversification Opportunities for Enova International and AFC Gamma

0.3

Correlation Coefficient

Enova International  AFC Gamma

Weak diversification

The 3 months correlation between Enova and AFC is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Enova International and AFC Gamma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFC Gamma and Enova International 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 Enova International are associated (or correlated) with AFC Gamma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFC Gamma has no effect on the direction of Enova International i.e., Enova International and AFC Gamma go up and down completely randomly.

Pair Corralation between Enova International and AFC Gamma

Given the investment horizon of 90 days Enova International is expected to generate 0.68 times more return on investment than AFC Gamma. However, Enova International is 1.47 times less risky than AFC Gamma. It trades about 0.02 of its potential returns per unit of risk. AFC Gamma is currently generating about -0.13 per unit of risk. If you would invest  9,788  in Enova International on December 27, 2024 and sell it today you would earn a total of  140.00  from holding Enova International or generate 1.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Enova International  vs.  AFC Gamma

Enova International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enova International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Enova International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

AFC Gamma

Risk-Adjusted Performance

Very Weak

Over the last 90 days AFC Gamma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Enova International and AFC Gamma

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

The idea behind Enova International and AFC Gamma 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.