Correlation Between Encore Capital and 78409VBL7

Can any of the company-specific risk be diversified away by investing in both Encore Capital and 78409VBL7 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 78409VBL7 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 SPGI 37 01 MAR 52, you can compare the effects of market volatilities on Encore Capital and 78409VBL7 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 78409VBL7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and 78409VBL7.

Diversification Opportunities for Encore Capital and 78409VBL7

-0.49

Correlation Coefficient

Encore Capital  78409VBL7

Very good diversification

The 3 months correlation between Encore and 78409VBL7 is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and SPGI 37 01 MAR 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPGI 37 01 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 78409VBL7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPGI 37 01 has no effect on the direction of Encore Capital i.e., Encore Capital and 78409VBL7 go up and down completely randomly.

Pair Corralation between Encore Capital and 78409VBL7

Given the investment horizon of 90 days Encore Capital Group is expected to generate 1.46 times more return on investment than 78409VBL7. However, Encore Capital is 1.46 times more volatile than SPGI 37 01 MAR 52. It trades about 0.06 of its potential returns per unit of risk. SPGI 37 01 MAR 52 is currently generating about -0.02 per unit of risk. If you would invest  4,191  in Encore Capital Group on September 30, 2024 and sell it today you would earn a total of  561.00  from holding Encore Capital Group or generate 13.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	87.3%
Values	Daily Returns

Encore Capital Group  vs.  SPGI 37 01 MAR 52

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.

SPGI 37 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPGI 37 01 MAR 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal 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 SPGI 37 01 MAR 52 investors.

Pair Trading with Encore Capital and 78409VBL7

The main advantage of trading using opposite Encore Capital and 78409VBL7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, 78409VBL7 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 78409VBL7 will offset losses from the drop in 78409VBL7's long position.

The idea behind Encore Capital Group and SPGI 37 01 MAR 52 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.