Correlation Between Encore Capital and Seven Hills

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

Diversification Opportunities for Encore Capital and Seven Hills

-0.31

Correlation Coefficient

Encore Capital  Seven Hills

Very good diversification

The 3 months correlation between Encore and Seven is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Seven Hills Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven Hills Realty 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 Seven Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven Hills Realty has no effect on the direction of Encore Capital i.e., Encore Capital and Seven Hills go up and down completely randomly.

Pair Corralation between Encore Capital and Seven Hills

Given the investment horizon of 90 days Encore Capital is expected to generate 4.78 times less return on investment than Seven Hills. In addition to that, Encore Capital is 1.25 times more volatile than Seven Hills Realty. It trades about 0.01 of its total potential returns per unit of risk. Seven Hills Realty is currently generating about 0.09 per unit of volatility. If you would invest  679.00  in Seven Hills Realty on September 14, 2024 and sell it today you would earn a total of  663.00  from holding Seven Hills Realty or generate 97.64% return on investment over 90 days.

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

Encore Capital Group  vs.  Seven Hills Realty

Encore Capital Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Encore Capital Group are ranked lower than 2 (%) 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.

Seven Hills Realty

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seven Hills Realty are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Seven Hills is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Encore Capital and Seven Hills

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

The idea behind Encore Capital Group and Seven Hills Realty 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.