Correlation Between Encore Capital and Analog Devices
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Analog Devices 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 Encore Capital and Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Encore Capital Group and Analog Devices, you can compare the effects of market volatilities on Encore Capital and Analog Devices 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 Encore Capital with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Analog Devices.
Diversification Opportunities for Encore Capital and Analog Devices
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Encore and Analog is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Encore Capital 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 Encore Capital Group are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Encore Capital i.e., Encore Capital and Analog Devices go up and down completely randomly.
Pair Corralation between Encore Capital and Analog Devices
Given the investment horizon of 90 days Encore Capital is expected to generate 1.86 times less return on investment than Analog Devices. In addition to that, Encore Capital is 1.21 times more volatile than Analog Devices. It trades about 0.02 of its total potential returns per unit of risk. Analog Devices is currently generating about 0.05 per unit of volatility. If you would invest 17,455 in Analog Devices on September 3, 2024 and sell it today you would earn a total of 4,350 from holding Analog Devices or generate 24.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. Analog Devices
Performance |
| Timeline |
| Encore Capital Group |
| Analog Devices |
Encore Capital and Analog Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Analog Devices
The main advantage of trading using opposite Encore Capital and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.| Encore Capital vs. Guild Holdings Co | Encore Capital vs. Mr Cooper Group | Encore Capital vs. CNFinance Holdings | Encore Capital vs. Security National Financial |
| Analog Devices vs. Silicon Motion Technology | Analog Devices vs. ASE Industrial Holding | Analog Devices vs. SemiLEDS | Analog Devices vs. Advanced Micro Devices |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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