Correlation Between Encore Capital and Employers Holdings
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Employers 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 Employers 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 Employers Holdings, you can compare the effects of market volatilities on Encore Capital and Employers 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 Employers Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Employers Holdings.
Diversification Opportunities for Encore Capital and Employers Holdings
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Encore and Employers is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Employers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Employers 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 Employers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Employers Holdings has no effect on the direction of Encore Capital i.e., Encore Capital and Employers Holdings go up and down completely randomly.
Pair Corralation between Encore Capital and Employers Holdings
Given the investment horizon of 90 days Encore Capital is expected to generate 1.94 times less return on investment than Employers Holdings. But when comparing it to its historical volatility, Encore Capital Group is 1.24 times less risky than Employers Holdings. It trades about 0.13 of its potential returns per unit of risk. Employers Holdings is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,775 in Employers Holdings on August 24, 2024 and sell it today you would earn a total of 504.00 from holding Employers Holdings or generate 10.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. Employers Holdings
Performance |
| Timeline |
| Encore Capital Group |
| Employers Holdings |
Encore Capital and Employers Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Employers Holdings
The main advantage of trading using opposite Encore Capital and Employers Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Employers 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 Employers Holdings will offset losses from the drop in Employers 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 |
| Employers Holdings vs. ICC Holdings | Employers Holdings vs. AMERISAFE | Employers Holdings vs. NMI Holdings | Employers Holdings vs. Investors Title |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |