Correlation Between Instructure Holdings and Enfusion

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

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

Diversification Opportunities for Instructure Holdings and Enfusion

0.62

Correlation Coefficient

Instructure Holdings  Enfusion

Poor diversification

The 3 months correlation between Instructure and Enfusion is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Instructure Holdings and Enfusion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enfusion and Instructure Holdings 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 Instructure Holdings are associated (or correlated) with Enfusion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enfusion has no effect on the direction of Instructure Holdings i.e., Instructure Holdings and Enfusion go up and down completely randomly.

Pair Corralation between Instructure Holdings and Enfusion

Given the investment horizon of 90 days Instructure Holdings is expected to generate 70.14 times less return on investment than Enfusion. But when comparing it to its historical volatility, Instructure Holdings is 15.65 times less risky than Enfusion. It trades about 0.05 of its potential returns per unit of risk. Enfusion is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  821.00  in Enfusion on September 13, 2024 and sell it today you would earn a total of  235.00  from holding Enfusion or generate 28.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	68.75%
Values	Daily Returns

Instructure Holdings  vs.  Enfusion

Instructure Holdings

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Instructure Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Instructure Holdings is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Enfusion

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Instructure Holdings and Enfusion

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

The idea behind Instructure Holdings and Enfusion 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.