Correlation Between Northstar Clean and Encore Capital

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

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

Diversification Opportunities for Northstar Clean and Encore Capital

0.3

Correlation Coefficient

Northstar Clean  Encore Capital

Weak diversification

The 3 months correlation between Northstar and Encore is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies 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 Northstar Clean 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 Northstar Clean Technologies 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 Northstar Clean i.e., Northstar Clean and Encore Capital go up and down completely randomly.

Pair Corralation between Northstar Clean and Encore Capital

Assuming the 90 days horizon Northstar Clean Technologies is expected to generate 1.09 times more return on investment than Encore Capital. However, Northstar Clean is 1.09 times more volatile than Encore Capital Group. It trades about 0.02 of its potential returns per unit of risk. Encore Capital Group is currently generating about -0.13 per unit of risk. If you would invest  24.00  in Northstar Clean Technologies on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Northstar Clean Technologies or generate 0.0% return on investment over 90 days.

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

Northstar Clean Technologies  vs.  Encore Capital Group

Northstar Clean Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Northstar Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Encore Capital Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Encore Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Northstar Clean and Encore Capital

The main advantage of trading using opposite Northstar Clean and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northstar Clean 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 Northstar Clean Technologies 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.