Correlation Between Encore Capital and SEI Investments
Can any of the company-specific risk be diversified away by investing in both Encore Capital and SEI Investments 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 SEI Investments 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 SEI Investments, you can compare the effects of market volatilities on Encore Capital and SEI Investments 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 SEI Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and SEI Investments.
Diversification Opportunities for Encore Capital and SEI Investments
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Encore and SEI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments 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 SEI Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Investments has no effect on the direction of Encore Capital i.e., Encore Capital and SEI Investments go up and down completely randomly.
Pair Corralation between Encore Capital and SEI Investments
Given the investment horizon of 90 days Encore Capital Group is expected to under-perform the SEI Investments. In addition to that, Encore Capital is 2.68 times more volatile than SEI Investments. It trades about -0.14 of its total potential returns per unit of risk. SEI Investments is currently generating about -0.08 per unit of volatility. If you would invest 8,029 in SEI Investments on December 18, 2024 and sell it today you would lose (533.00) from holding SEI Investments or give up 6.64% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Encore Capital Group vs. SEI Investments
Performance |
Timeline |
Encore Capital Group |
SEI Investments |
Encore Capital and SEI Investments Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Encore Capital and SEI Investments
The main advantage of trading using opposite Encore Capital and SEI Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, SEI Investments 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 SEI Investments will offset losses from the drop in SEI Investments' long position.Encore Capital vs. Guild Holdings Co | Encore Capital vs. Mr Cooper Group | Encore Capital vs. CNFinance Holdings | Encore Capital vs. Security National Financial |
SEI Investments vs. Commerce Bancshares | SEI Investments vs. RLI Corp | SEI Investments vs. Westamerica Bancorporation | SEI Investments vs. Brown Brown |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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