Correlation Between Aldel Financial and Encore Capital

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

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

Diversification Opportunities for Aldel Financial and Encore Capital

-0.12

Correlation Coefficient

Aldel Financial  Encore Capital

Good diversification

The 3 months correlation between Aldel and Encore is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Encore Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encore Capital Group and Aldel Financial 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 Aldel Financial II are associated (or correlated) with Encore Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encore Capital Group has no effect on the direction of Aldel Financial i.e., Aldel Financial and Encore Capital go up and down completely randomly.

Pair Corralation between Aldel Financial and Encore Capital

Given the investment horizon of 90 days Aldel Financial II is expected to generate 0.1 times more return on investment than Encore Capital. However, Aldel Financial II is 10.43 times less risky than Encore Capital. It trades about 0.11 of its potential returns per unit of risk. Encore Capital Group is currently generating about -0.08 per unit of risk. If you would invest  990.00  in Aldel Financial II on October 9, 2024 and sell it today you would earn a total of  2.00  from holding Aldel Financial II or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	37.5%
Values	Daily Returns

Aldel Financial II  vs.  Encore Capital Group

Aldel Financial II

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Encore Capital Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Encore Capital Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Encore Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aldel Financial and Encore Capital

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

The idea behind Aldel Financial II and Encore Capital Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.