Correlation Between Encore Capital and Kaltura

Can any of the company-specific risk be diversified away by investing in both Encore Capital and Kaltura 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 Kaltura 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 Kaltura, you can compare the effects of market volatilities on Encore Capital and Kaltura 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 Kaltura. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Kaltura.

Diversification Opportunities for Encore Capital and Kaltura

0.75

Correlation Coefficient

Encore Capital  Kaltura

Poor diversification

The 3 months correlation between Encore and Kaltura is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Kaltura in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaltura 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 Kaltura. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaltura has no effect on the direction of Encore Capital i.e., Encore Capital and Kaltura go up and down completely randomly.

Pair Corralation between Encore Capital and Kaltura

Given the investment horizon of 90 days Encore Capital is expected to generate 5.79 times less return on investment than Kaltura. But when comparing it to its historical volatility, Encore Capital Group is 3.37 times less risky than Kaltura. It trades about 0.15 of its potential returns per unit of risk. Kaltura is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  134.00  in Kaltura on September 19, 2024 and sell it today you would earn a total of  93.00  from holding Kaltura or generate 69.4% return on investment over 90 days.

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

Encore Capital Group  vs.  Kaltura

Encore Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encore Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Encore Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Kaltura

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kaltura are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Kaltura reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Encore Capital and Kaltura

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

The idea behind Encore Capital Group and Kaltura 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..