Correlation Between Encore Capital and NESNVX

Can any of the company-specific risk be diversified away by investing in both Encore Capital and NESNVX 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 NESNVX 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 NESNVX 1875 14 SEP 31, you can compare the effects of market volatilities on Encore Capital and NESNVX 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 NESNVX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and NESNVX.

Diversification Opportunities for Encore Capital and NESNVX

0.32

Correlation Coefficient

Encore Capital  NESNVX

Weak diversification

The 3 months correlation between Encore and NESNVX is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and NESNVX 1875 14 SEP 31 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NESNVX 1875 14 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 NESNVX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NESNVX 1875 14 has no effect on the direction of Encore Capital i.e., Encore Capital and NESNVX go up and down completely randomly.

Pair Corralation between Encore Capital and NESNVX

Given the investment horizon of 90 days Encore Capital Group is expected to generate 2.21 times more return on investment than NESNVX. However, Encore Capital is 2.21 times more volatile than NESNVX 1875 14 SEP 31. It trades about 0.01 of its potential returns per unit of risk. NESNVX 1875 14 SEP 31 is currently generating about -0.01 per unit of risk. If you would invest  4,944  in Encore Capital Group on September 26, 2024 and sell it today you would lose (192.00) from holding Encore Capital Group or give up 3.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	27.22%
Values	Daily Returns

Encore Capital Group  vs.  NESNVX 1875 14 SEP 31

Encore Capital Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Encore Capital Group are ranked lower than 1 (%) 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.

NESNVX 1875 14

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NESNVX 1875 14 SEP 31 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for NESNVX 1875 14 SEP 31 investors.

Pair Trading with Encore Capital and NESNVX

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

The idea behind Encore Capital Group and NESNVX 1875 14 SEP 31 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.