Correlation Between Enova International and FinVolution

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

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

Diversification Opportunities for Enova International and FinVolution

-0.15

Correlation Coefficient

Enova International  FinVolution

Good diversification

The 3 months correlation between Enova and FinVolution is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Enova International and FinVolution Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FinVolution Group 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 FinVolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FinVolution Group has no effect on the direction of Enova International i.e., Enova International and FinVolution go up and down completely randomly.

Pair Corralation between Enova International and FinVolution

Given the investment horizon of 90 days Enova International is expected to generate 60.9 times less return on investment than FinVolution. But when comparing it to its historical volatility, Enova International is 1.53 times less risky than FinVolution. It trades about 0.0 of its potential returns per unit of risk. FinVolution Group is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  680.00  in FinVolution Group on December 30, 2024 and sell it today you would earn a total of  296.00  from holding FinVolution Group or generate 43.53% return on investment over 90 days.

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

Enova International  vs.  FinVolution Group

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.

FinVolution Group

Risk-Adjusted Performance

Good

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

Pair Trading with Enova International and FinVolution

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

The idea behind Enova International and FinVolution Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.