Correlation Between Zip Co and Enova International

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

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

Diversification Opportunities for Zip Co and Enova International

-0.39

Correlation Coefficient

Zip Co  Enova International

Very good diversification

The 3 months correlation between Zip and Enova is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Zip Co Limited and Enova International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enova International and Zip Co 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 Zip Co Limited 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 Zip Co i.e., Zip Co and Enova International go up and down completely randomly.

Pair Corralation between Zip Co and Enova International

Assuming the 90 days horizon Zip Co Limited is expected to generate 3.67 times more return on investment than Enova International. However, Zip Co is 3.67 times more volatile than Enova International. It trades about 0.09 of its potential returns per unit of risk. Enova International is currently generating about -0.27 per unit of risk. If you would invest  151.00  in Zip Co Limited on December 2, 2024 and sell it today you would earn a total of  12.00  from holding Zip Co Limited or generate 7.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Zip Co Limited  vs.  Enova International

Zip Co Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zip Co Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Zip Co and Enova International

The main advantage of trading using opposite Zip Co and Enova International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zip Co 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 Zip Co Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.