Correlation Between Enova International and Credit Acceptance

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

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

Diversification Opportunities for Enova International and Credit Acceptance

-0.39

Correlation Coefficient

Enova International  Credit Acceptance

Very good diversification

The 3 months correlation between Enova and Credit is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Enova International and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance 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 Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of Enova International i.e., Enova International and Credit Acceptance go up and down completely randomly.

Pair Corralation between Enova International and Credit Acceptance

Given the investment horizon of 90 days Enova International is expected to generate 0.91 times more return on investment than Credit Acceptance. However, Enova International is 1.09 times less risky than Credit Acceptance. It trades about 0.09 of its potential returns per unit of risk. Credit Acceptance is currently generating about -0.23 per unit of risk. If you would invest  6,129  in Enova International on February 11, 2024 and sell it today you would earn a total of  191.00  from holding Enova International or generate 3.12% return on investment over 90 days.

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

Enova International  vs.  Credit Acceptance

Enova International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enova International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Enova International may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Credit Acceptance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credit Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Enova International and Credit Acceptance

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

The idea behind Enova International and Credit Acceptance 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.