Correlation Between Encore Capital and Arrow Financial
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Arrow Financial 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 Arrow Financial 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 Arrow Financial, you can compare the effects of market volatilities on Encore Capital and Arrow Financial 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 Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Arrow Financial.
Diversification Opportunities for Encore Capital and Arrow Financial
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Encore and Arrow is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial 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 Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Encore Capital i.e., Encore Capital and Arrow Financial go up and down completely randomly.
Pair Corralation between Encore Capital and Arrow Financial
Given the investment horizon of 90 days Encore Capital is expected to generate 2.22 times less return on investment than Arrow Financial. But when comparing it to its historical volatility, Encore Capital Group is 1.87 times less risky than Arrow Financial. It trades about 0.17 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,921 in Arrow Financial on August 28, 2024 and sell it today you would earn a total of 414.00 from holding Arrow Financial or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. Arrow Financial
Performance |
| Timeline |
| Encore Capital Group |
| Arrow Financial |
Encore Capital and Arrow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Arrow Financial
The main advantage of trading using opposite Encore Capital and Arrow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Arrow Financial 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 Arrow Financial will offset losses from the drop in Arrow Financial's 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 |
| Arrow Financial vs. Fifth Third Bancorp | Arrow Financial vs. Huntington Bancshares Incorporated | Arrow Financial vs. Comerica | Arrow Financial vs. MT Bank |
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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