Correlation Between FirstCash and Enova International

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

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

Diversification Opportunities for FirstCash and Enova International

0.09

Correlation Coefficient

FirstCash  Enova International

Significant diversification

The 3 months correlation between FirstCash and Enova is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash and Enova International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enova International and FirstCash 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 FirstCash are associated (or correlated) with Enova International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enova International has no effect on the direction of FirstCash i.e., FirstCash and Enova International go up and down completely randomly.

Pair Corralation between FirstCash and Enova International

Given the investment horizon of 90 days FirstCash is expected to generate 0.57 times more return on investment than Enova International. However, FirstCash is 1.76 times less risky than Enova International. It trades about 0.21 of its potential returns per unit of risk. Enova International is currently generating about 0.03 per unit of risk. If you would invest  10,262  in FirstCash on December 29, 2024 and sell it today you would earn a total of  1,753  from holding FirstCash or generate 17.08% return on investment over 90 days.

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

FirstCash  vs.  Enova International

FirstCash

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FirstCash are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, FirstCash unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with FirstCash and Enova International

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

The idea behind FirstCash and Enova International 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.