Correlation Between Enova International and FirstCash

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

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

Diversification Opportunities for Enova International and FirstCash

0.75

Correlation Coefficient

Enova International  FirstCash

Poor diversification

The 3 months correlation between Enova and FirstCash is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Enova International and FirstCash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstCash 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 FirstCash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstCash has no effect on the direction of Enova International i.e., Enova International and FirstCash go up and down completely randomly.

Pair Corralation between Enova International and FirstCash

Given the investment horizon of 90 days Enova International is expected to under-perform the FirstCash. In addition to that, Enova International is 1.35 times more volatile than FirstCash. It trades about -0.02 of its total potential returns per unit of risk. FirstCash is currently generating about 0.04 per unit of volatility. If you would invest  10,851  in FirstCash on November 28, 2024 and sell it today you would earn a total of  286.00  from holding FirstCash or generate 2.64% return on investment over 90 days.

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

Enova International  vs.  FirstCash

Enova International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enova International has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

FirstCash

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FirstCash are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, FirstCash is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Enova International and FirstCash

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

The idea behind Enova International and FirstCash 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.