Correlation Between Encore Capital and CNFinance Holdings
Can any of the company-specific risk be diversified away by investing in both Encore Capital and CNFinance Holdings 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 CNFinance Holdings 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 CNFinance Holdings, you can compare the effects of market volatilities on Encore Capital and CNFinance Holdings 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 CNFinance Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and CNFinance Holdings.
Diversification Opportunities for Encore Capital and CNFinance Holdings
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Encore and CNFinance is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and CNFinance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNFinance Holdings 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 CNFinance Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNFinance Holdings has no effect on the direction of Encore Capital i.e., Encore Capital and CNFinance Holdings go up and down completely randomly.
Pair Corralation between Encore Capital and CNFinance Holdings
Given the investment horizon of 90 days Encore Capital Group is expected to generate 0.43 times more return on investment than CNFinance Holdings. However, Encore Capital Group is 2.31 times less risky than CNFinance Holdings. It trades about 0.0 of its potential returns per unit of risk. CNFinance Holdings is currently generating about -0.01 per unit of risk. If you would invest 5,732 in Encore Capital Group on August 27, 2024 and sell it today you would lose (831.00) from holding Encore Capital Group or give up 14.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. CNFinance Holdings
Performance |
| Timeline |
| Encore Capital Group |
| CNFinance Holdings |
Encore Capital and CNFinance Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and CNFinance Holdings
The main advantage of trading using opposite Encore Capital and CNFinance Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, CNFinance Holdings 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 CNFinance Holdings will offset losses from the drop in CNFinance Holdings' 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 |
| CNFinance Holdings vs. Guild Holdings Co | CNFinance Holdings vs. PennyMac Finl Svcs | CNFinance Holdings vs. Security National Financial | CNFinance Holdings vs. Encore Capital Group |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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