Correlation Between Enfusion and Appfolio

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

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

Diversification Opportunities for Enfusion and Appfolio

0.2

Correlation Coefficient

Enfusion  Appfolio

Modest diversification

The 3 months correlation between Enfusion and Appfolio is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Enfusion and Appfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appfolio and Enfusion 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 Enfusion are associated (or correlated) with Appfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appfolio has no effect on the direction of Enfusion i.e., Enfusion and Appfolio go up and down completely randomly.

Pair Corralation between Enfusion and Appfolio

Given the investment horizon of 90 days Enfusion is expected to generate 1.85 times less return on investment than Appfolio. In addition to that, Enfusion is 1.0 times more volatile than Appfolio. It trades about 0.23 of its total potential returns per unit of risk. Appfolio is currently generating about 0.42 per unit of volatility. If you would invest  21,037  in Appfolio on August 28, 2024 and sell it today you would earn a total of  4,069  from holding Appfolio or generate 19.34% return on investment over 90 days.

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

Enfusion  vs.  Appfolio

Enfusion

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enfusion are ranked lower than 14 (%) 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.

Appfolio

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Appfolio are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Appfolio may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Enfusion and Appfolio

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

The idea behind Enfusion and Appfolio 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.