Correlation Between Enova International and Freedom Holding

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

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

Diversification Opportunities for Enova International and Freedom Holding

0.73

Correlation Coefficient

Enova International  Freedom Holding

Poor diversification

The 3 months correlation between Enova and Freedom is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Enova International and Freedom Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holding Corp 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 Freedom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holding Corp has no effect on the direction of Enova International i.e., Enova International and Freedom Holding go up and down completely randomly.

Pair Corralation between Enova International and Freedom Holding

Given the investment horizon of 90 days Enova International is expected to generate 0.84 times more return on investment than Freedom Holding. However, Enova International is 1.18 times less risky than Freedom Holding. It trades about 0.03 of its potential returns per unit of risk. Freedom Holding Corp is currently generating about 0.02 per unit of risk. If you would invest  9,694  in Enova International on December 29, 2024 and sell it today you would earn a total of  234.00  from holding Enova International or generate 2.41% 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.  Freedom Holding Corp

Enova International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enova International are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Freedom Holding Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holding Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Freedom Holding is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Enova International and Freedom Holding

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

The idea behind Enova International and Freedom Holding Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..