Correlation Between American Express and Enova International
Can any of the company-specific risk be diversified away by investing in both American Express 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 American Express and Enova International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Enova International, you can compare the effects of market volatilities on American Express 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 American Express with a short position of Enova International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Enova International.
Diversification Opportunities for American Express and Enova International
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Enova is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Enova International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enova International and American Express 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 American Express 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 American Express i.e., American Express and Enova International go up and down completely randomly.
Pair Corralation between American Express and Enova International
Considering the 90-day investment horizon American Express is expected to generate 1.02 times less return on investment than Enova International. But when comparing it to its historical volatility, American Express is 1.61 times less risky than Enova International. It trades about 0.12 of its potential returns per unit of risk. Enova International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,166 in Enova International on January 21, 2024 and sell it today you would earn a total of 1,905 from holding Enova International or generate 45.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Enova International
Performance |
| Timeline |
| American Express |
| Enova International |
American Express and Enova International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Enova International
The main advantage of trading using opposite American Express and Enova International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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.| American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Mastercard |
| Enova International vs. Visa Class A | Enova International vs. PayPal Holdings | Enova International vs. Mastercard |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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