Correlation Between Integral and Encore Capital

Can any of the company-specific risk be diversified away by investing in both Integral and Encore Capital 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 Integral and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Integral Ad Science and Encore Capital Group, you can compare the effects of market volatilities on Integral and Encore Capital 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 Integral with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Integral and Encore Capital.

Diversification Opportunities for Integral and Encore Capital

0.38

Correlation Coefficient

Integral  Encore Capital

Weak diversification

The 3 months correlation between Integral and Encore is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Integral Ad Science and Encore Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encore Capital Group and Integral 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 Integral Ad Science are associated (or correlated) with Encore Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encore Capital Group has no effect on the direction of Integral i.e., Integral and Encore Capital go up and down completely randomly.

Pair Corralation between Integral and Encore Capital

Considering the 90-day investment horizon Integral Ad Science is expected to under-perform the Encore Capital. But the stock apears to be less risky and, when comparing its historical volatility, Integral Ad Science is 1.02 times less risky than Encore Capital. The stock trades about -0.26 of its potential returns per unit of risk. The Encore Capital Group is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  4,901  in Encore Capital Group on September 26, 2024 and sell it today you would lose (149.00) from holding Encore Capital Group or give up 3.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Integral Ad Science  vs.  Encore Capital Group

Integral Ad Science

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Integral Ad Science has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Integral is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Integral and Encore Capital

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

The idea behind Integral Ad Science and Encore Capital Group 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..