Correlation Between Encore Capital and Top Frontier

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

Diversification Opportunities for Encore Capital and Top Frontier

0.0

Correlation Coefficient

Encore Capital  Top Frontier

Pay attention - limited upside

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

Pair Corralation between Encore Capital and Top Frontier

If you would invest  181.00  in Top Frontier Investment on October 25, 2024 and sell it today you would earn a total of  0.00  from holding Top Frontier Investment or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Encore Capital Group  vs.  Top Frontier Investment

Encore Capital Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Encore Capital Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Encore Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Top Frontier Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Top Frontier Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Top Frontier is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Encore Capital and Top Frontier

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

The idea behind Encore Capital Group and Top Frontier Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.