Correlation Between Encore Capital and UNITEDHEALTH

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

Diversification Opportunities for Encore Capital and UNITEDHEALTH

0.05

Correlation Coefficient

Encore Capital  UNITEDHEALTH

Significant diversification

The 3 months correlation between Encore and UNITEDHEALTH is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and UNITEDHEALTH GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITEDHEALTH GROUP INC 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 UNITEDHEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITEDHEALTH GROUP INC has no effect on the direction of Encore Capital i.e., Encore Capital and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between Encore Capital and UNITEDHEALTH

Given the investment horizon of 90 days Encore Capital Group is expected to under-perform the UNITEDHEALTH. In addition to that, Encore Capital is 2.72 times more volatile than UNITEDHEALTH GROUP INC. It trades about -0.2 of its total potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about -0.11 per unit of volatility. If you would invest  9,866  in UNITEDHEALTH GROUP INC on October 11, 2024 and sell it today you would lose (109.00) from holding UNITEDHEALTH GROUP INC or give up 1.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Encore Capital Group  vs.  UNITEDHEALTH GROUP INC

Encore Capital Group

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Encore Capital Group are ranked lower than 2 (%) 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.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITEDHEALTH GROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UNITEDHEALTH is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Encore Capital and UNITEDHEALTH

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

The idea behind Encore Capital Group and UNITEDHEALTH GROUP INC 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.