Correlation Between Encore Capital and Federal National
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Federal National 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 Federal National 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 Federal National Mortgage, you can compare the effects of market volatilities on Encore Capital and Federal National 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 Federal National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Federal National.
Diversification Opportunities for Encore Capital and Federal National
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Encore and Federal is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage 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 Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of Encore Capital i.e., Encore Capital and Federal National go up and down completely randomly.
Pair Corralation between Encore Capital and Federal National
Given the investment horizon of 90 days Encore Capital is expected to generate 30.23 times less return on investment than Federal National. But when comparing it to its historical volatility, Encore Capital Group is 2.78 times less risky than Federal National. It trades about 0.01 of its potential returns per unit of risk. Federal National Mortgage is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 45.00 in Federal National Mortgage on August 31, 2024 and sell it today you would earn a total of 268.00 from holding Federal National Mortgage or generate 595.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. Federal National Mortgage
Performance |
| Timeline |
| Encore Capital Group |
| Federal National Mortgage |
Encore Capital and Federal National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Federal National
The main advantage of trading using opposite Encore Capital and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Federal National 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 Federal National will offset losses from the drop in Federal National'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 |
| Federal National vs. Q2 Holdings | Federal National vs. National CineMedia | Federal National vs. CDW Corp | Federal National vs. Cimpress NV |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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