Correlation Between Addus HomeCare and Encore Capital
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare 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 Addus HomeCare and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and Encore Capital Group, you can compare the effects of market volatilities on Addus HomeCare 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 Addus HomeCare with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Encore Capital.
Diversification Opportunities for Addus HomeCare and Encore Capital
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Addus and Encore is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare 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 Addus HomeCare 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 Addus HomeCare 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 Addus HomeCare i.e., Addus HomeCare and Encore Capital go up and down completely randomly.
Pair Corralation between Addus HomeCare and Encore Capital
Given the investment horizon of 90 days Addus HomeCare is expected to under-perform the Encore Capital. In addition to that, Addus HomeCare is 1.14 times more volatile than Encore Capital Group. It trades about -0.08 of its total potential returns per unit of risk. Encore Capital Group is currently generating about 0.17 per unit of volatility. If you would invest 4,608 in Encore Capital Group on August 28, 2024 and sell it today you would earn a total of 293.00 from holding Encore Capital Group or generate 6.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Addus HomeCare vs. Encore Capital Group
Performance |
| Timeline |
| Addus HomeCare |
| Encore Capital Group |
Addus HomeCare and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and Encore Capital
The main advantage of trading using opposite Addus HomeCare and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare 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.| Addus HomeCare vs. Encompass Health Corp | Addus HomeCare vs. Pennant Group | Addus HomeCare vs. Acadia Healthcare | Addus HomeCare vs. Select Medical Holdings |
| Encore Capital vs. Guild Holdings Co | Encore Capital vs. Mr Cooper Group | Encore Capital vs. CNFinance Holdings | Encore Capital vs. Security National Financial |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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