Correlation Between Encore Capital and 00751YAJ5

Can any of the company-specific risk be diversified away by investing in both Encore Capital and 00751YAJ5 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 00751YAJ5 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 AAP 595 09 MAR 28, you can compare the effects of market volatilities on Encore Capital and 00751YAJ5 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 00751YAJ5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and 00751YAJ5.

Diversification Opportunities for Encore Capital and 00751YAJ5

-0.17

Correlation Coefficient

Encore Capital  00751YAJ5

Good diversification

The 3 months correlation between Encore and 00751YAJ5 is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and AAP 595 09 MAR 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP 595 09 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 00751YAJ5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP 595 09 has no effect on the direction of Encore Capital i.e., Encore Capital and 00751YAJ5 go up and down completely randomly.

Pair Corralation between Encore Capital and 00751YAJ5

Given the investment horizon of 90 days Encore Capital Group is expected to generate 2.93 times more return on investment than 00751YAJ5. However, Encore Capital is 2.93 times more volatile than AAP 595 09 MAR 28. It trades about 0.01 of its potential returns per unit of risk. AAP 595 09 MAR 28 is currently generating about 0.02 per unit of risk. If you would invest  5,076  in Encore Capital Group on September 11, 2024 and sell it today you would lose (140.00) from holding Encore Capital Group or give up 2.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Encore Capital Group  vs.  AAP 595 09 MAR 28

Encore Capital Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Encore Capital Group are ranked lower than 6 (%) 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 January 2025.

AAP 595 09

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AAP 595 09 MAR 28 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 00751YAJ5 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Encore Capital and 00751YAJ5

The main advantage of trading using opposite Encore Capital and 00751YAJ5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, 00751YAJ5 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 00751YAJ5 will offset losses from the drop in 00751YAJ5's long position.

The idea behind Encore Capital Group and AAP 595 09 MAR 28 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 Stocks Directory module to find actively traded stocks across global markets.