Correlation Between Encore Capital and Freedom Bank
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Freedom Bank 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 Freedom Bank 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 Freedom Bank of, you can compare the effects of market volatilities on Encore Capital and Freedom Bank 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 Freedom Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Freedom Bank.
Diversification Opportunities for Encore Capital and Freedom Bank
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Encore and Freedom is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Encore Capital i.e., Encore Capital and Freedom Bank go up and down completely randomly.
Pair Corralation between Encore Capital and Freedom Bank
Given the investment horizon of 90 days Encore Capital Group is expected to generate 2.8 times more return on investment than Freedom Bank. However, Encore Capital is 2.8 times more volatile than Freedom Bank of. It trades about 0.17 of its potential returns per unit of risk. Freedom Bank of is currently generating about 0.09 per unit of risk. If you would invest 4,608 in Encore Capital Group on August 28, 2024 and sell it today you would earn a total of 293.00 from holding Encore Capital Group or generate 6.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. Freedom Bank of
Performance |
| Timeline |
| Encore Capital Group |
| Freedom Bank |
Encore Capital and Freedom Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Freedom Bank
The main advantage of trading using opposite Encore Capital and Freedom Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Freedom Bank 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 Freedom Bank will offset losses from the drop in Freedom Bank'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 |
| Freedom Bank vs. Washington Business Bank | Freedom Bank vs. National Capital Bank | Freedom Bank vs. Community Heritage Financial | Freedom Bank vs. Citizens Financial Corp |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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