Correlation Between Enova International and X Financial

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

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

Diversification Opportunities for Enova International and X Financial

-0.44

Correlation Coefficient

Enova International  X Financial

Very good diversification

The 3 months correlation between Enova and XYF is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Enova International and X Financial Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Financial Class 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 X Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Financial Class has no effect on the direction of Enova International i.e., Enova International and X Financial go up and down completely randomly.

Pair Corralation between Enova International and X Financial

Given the investment horizon of 90 days Enova International is expected to generate 16.76 times less return on investment than X Financial. But when comparing it to its historical volatility, Enova International is 2.2 times less risky than X Financial. It trades about 0.03 of its potential returns per unit of risk. X Financial Class is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  842.00  in X Financial Class on December 27, 2024 and sell it today you would earn a total of  689.00  from holding X Financial Class or generate 81.83% return on investment over 90 days.

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

Enova International  vs.  X Financial Class

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 recent stock price disturbance, may contribute to short-term losses for the investors.

X Financial Class

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, X Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enova International and X Financial

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

The idea behind Enova International and X Financial Class 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.