Correlation Between Dorman Products and Encore Capital
Can any of the company-specific risk be diversified away by investing in both Dorman Products 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 Dorman Products and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dorman Products and Encore Capital Group, you can compare the effects of market volatilities on Dorman Products 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 Dorman Products with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorman Products and Encore Capital.
Diversification Opportunities for Dorman Products and Encore Capital
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dorman and Encore is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products 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 Dorman Products 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 Dorman Products 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 Dorman Products i.e., Dorman Products and Encore Capital go up and down completely randomly.
Pair Corralation between Dorman Products and Encore Capital
Given the investment horizon of 90 days Dorman Products is expected to generate 0.96 times more return on investment than Encore Capital. However, Dorman Products is 1.04 times less risky than Encore Capital. It trades about 0.05 of its potential returns per unit of risk. Encore Capital Group is currently generating about 0.01 per unit of risk. If you would invest 8,938 in Dorman Products on August 24, 2024 and sell it today you would earn a total of 4,764 from holding Dorman Products or generate 53.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dorman Products vs. Encore Capital Group
Performance |
| Timeline |
| Dorman Products |
| Encore Capital Group |
Dorman Products and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dorman Products and Encore Capital
The main advantage of trading using opposite Dorman Products and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorman Products 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.| Dorman Products vs. Gentex | Dorman Products vs. Adient PLC | Dorman Products vs. Autoliv | Dorman Products vs. Fox Factory Holding |
| 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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