Correlation Between BCB Bancorp and Encore Capital
Can any of the company-specific risk be diversified away by investing in both BCB Bancorp 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 BCB Bancorp and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCB Bancorp and Encore Capital Group, you can compare the effects of market volatilities on BCB Bancorp 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 BCB Bancorp with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCB Bancorp and Encore Capital.
Diversification Opportunities for BCB Bancorp and Encore Capital
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BCB and Encore is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding BCB Bancorp 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 BCB Bancorp 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 BCB Bancorp 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 BCB Bancorp i.e., BCB Bancorp and Encore Capital go up and down completely randomly.
Pair Corralation between BCB Bancorp and Encore Capital
Given the investment horizon of 90 days BCB Bancorp is expected to generate 1.13 times more return on investment than Encore Capital. However, BCB Bancorp is 1.13 times more volatile than Encore Capital Group. It trades about 0.24 of its potential returns per unit of risk. Encore Capital Group is currently generating about 0.19 per unit of risk. If you would invest 1,204 in BCB Bancorp on August 30, 2024 and sell it today you would earn a total of 137.00 from holding BCB Bancorp or generate 11.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCB Bancorp vs. Encore Capital Group
Performance |
| Timeline |
| BCB Bancorp |
| Encore Capital Group |
BCB Bancorp and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCB Bancorp and Encore Capital
The main advantage of trading using opposite BCB Bancorp and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCB Bancorp 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.| BCB Bancorp vs. SVB T Corp | BCB Bancorp vs. First Capital | BCB Bancorp vs. Pioneer Bankcorp | BCB Bancorp vs. Liberty Northwest Bancorp |
| Encore Capital vs. 360 Finance | Encore Capital vs. Atlanticus Holdings | Encore Capital vs. X Financial Class | Encore Capital vs. Yirendai |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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