Correlation Between Encore Capital and Gladstone Investment
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Gladstone Investment 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 Encore Capital and Gladstone Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Encore Capital Group and Gladstone Investment, you can compare the effects of market volatilities on Encore Capital and Gladstone Investment 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 Encore Capital with a short position of Gladstone Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Gladstone Investment.
Diversification Opportunities for Encore Capital and Gladstone Investment
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Encore and Gladstone is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and Encore Capital 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 Encore Capital Group are associated (or correlated) with Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of Encore Capital i.e., Encore Capital and Gladstone Investment go up and down completely randomly.
Pair Corralation between Encore Capital and Gladstone Investment
Given the investment horizon of 90 days Encore Capital Group is expected to under-perform the Gladstone Investment. In addition to that, Encore Capital is 3.45 times more volatile than Gladstone Investment. It trades about 0.0 of its total potential returns per unit of risk. Gladstone Investment is currently generating about 0.04 per unit of volatility. If you would invest 2,201 in Gladstone Investment on September 20, 2024 and sell it today you would earn a total of 141.00 from holding Gladstone Investment or generate 6.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.6% |
Values | Daily Returns |
Encore Capital Group vs. Gladstone Investment
Performance |
Timeline |
Encore Capital Group |
Gladstone Investment |
Encore Capital and Gladstone Investment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Encore Capital and Gladstone Investment
The main advantage of trading using opposite Encore Capital and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Gladstone Investment 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 Gladstone Investment will offset losses from the drop in Gladstone Investment's long position.The idea behind Encore Capital Group and Gladstone Investment 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.Gladstone Investment vs. Gladstone Investment | Gladstone Investment vs. B Riley Financial | Gladstone Investment vs. B Riley Financial | Gladstone Investment vs. B Riley Financial, |
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 Stocks Directory module to find actively traded stocks across global markets.
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