Correlation Between Encore Capital and Manhattan Bridge

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

Diversification Opportunities for Encore Capital and Manhattan Bridge

0.1

Correlation Coefficient

Encore Capital  Manhattan Bridge

Average diversification

The 3 months correlation between Encore and Manhattan is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Manhattan Bridge Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manhattan Bridge Capital 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 Manhattan Bridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manhattan Bridge Capital has no effect on the direction of Encore Capital i.e., Encore Capital and Manhattan Bridge go up and down completely randomly.

Pair Corralation between Encore Capital and Manhattan Bridge

Given the investment horizon of 90 days Encore Capital Group is expected to under-perform the Manhattan Bridge. In addition to that, Encore Capital is 1.62 times more volatile than Manhattan Bridge Capital. It trades about -0.01 of its total potential returns per unit of risk. Manhattan Bridge Capital is currently generating about 0.03 per unit of volatility. If you would invest  461.00  in Manhattan Bridge Capital on December 2, 2024 and sell it today you would earn a total of  97.00  from holding Manhattan Bridge Capital or generate 21.04% 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.  Manhattan Bridge Capital

Encore Capital Group

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Manhattan Bridge Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Manhattan Bridge Capital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Manhattan Bridge 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 Manhattan Bridge

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

The idea behind Encore Capital Group and Manhattan Bridge Capital 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.