Correlation Between Encore Capital and Taronis Fuels

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

Diversification Opportunities for Encore Capital and Taronis Fuels

0.46

Correlation Coefficient

Encore Capital  Taronis Fuels

Very weak diversification

The 3 months correlation between Encore and Taronis is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Taronis Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taronis Fuels 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 Taronis Fuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taronis Fuels has no effect on the direction of Encore Capital i.e., Encore Capital and Taronis Fuels go up and down completely randomly.

Pair Corralation between Encore Capital and Taronis Fuels

If you would invest  4,514  in Encore Capital Group on October 25, 2024 and sell it today you would earn a total of  507.00  from holding Encore Capital Group or generate 11.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.67%
Values	Daily Returns

Encore Capital Group  vs.  Taronis Fuels

Encore Capital Group

Risk-Adjusted Performance

9 of 100

Modest

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 inconsistent basic indicators, Encore Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Taronis Fuels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taronis Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Taronis Fuels is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Encore Capital and Taronis Fuels

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

The idea behind Encore Capital Group and Taronis Fuels 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.