Correlation Between Encore Capital and Chicago Atlantic

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

Diversification Opportunities for Encore Capital and Chicago Atlantic

0.16

Correlation Coefficient

Encore Capital  Chicago Atlantic

Average diversification

The 3 months correlation between Encore and Chicago is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Chicago Atlantic BDC, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicago Atlantic BDC, 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 Chicago Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicago Atlantic BDC, has no effect on the direction of Encore Capital i.e., Encore Capital and Chicago Atlantic go up and down completely randomly.

Pair Corralation between Encore Capital and Chicago Atlantic

Given the investment horizon of 90 days Encore Capital is expected to generate 84.6 times less return on investment than Chicago Atlantic. In addition to that, Encore Capital is 1.09 times more volatile than Chicago Atlantic BDC,. It trades about 0.0 of its total potential returns per unit of risk. Chicago Atlantic BDC, is currently generating about 0.06 per unit of volatility. If you would invest  737.00  in Chicago Atlantic BDC, on October 4, 2024 and sell it today you would earn a total of  519.00  from holding Chicago Atlantic BDC, or generate 70.42% return on investment over 90 days.

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

Encore Capital Group  vs.  Chicago Atlantic BDC,

Encore Capital Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Encore Capital Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Chicago Atlantic BDC,

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chicago Atlantic BDC, are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Chicago Atlantic is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Encore Capital and Chicago Atlantic

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

The idea behind Encore Capital Group and Chicago Atlantic BDC, 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.