Correlation Between Encore Capital and Stewart Stevenson

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

Diversification Opportunities for Encore Capital and Stewart Stevenson

0.0

Correlation Coefficient

Encore Capital  Stewart Stevenson

Pay attention - limited upside

The 3 months correlation between Encore and Stewart is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Stewart Stevenson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stewart Stevenson 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 Stewart Stevenson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stewart Stevenson has no effect on the direction of Encore Capital i.e., Encore Capital and Stewart Stevenson go up and down completely randomly.

Pair Corralation between Encore Capital and Stewart Stevenson

If you would invest  4,676  in Encore Capital Group on October 22, 2024 and sell it today you would earn a total of  209.00  from holding Encore Capital Group or generate 4.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Encore Capital Group  vs.  Stewart Stevenson

Encore Capital Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Encore Capital Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Encore Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Stewart Stevenson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stewart Stevenson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Stewart Stevenson is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Encore Capital and Stewart Stevenson

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

The idea behind Encore Capital Group and Stewart Stevenson 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.