Correlation Between Encore Capital and Hawkins
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Hawkins 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 Hawkins 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 Hawkins, you can compare the effects of market volatilities on Encore Capital and Hawkins 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 Hawkins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Hawkins.
Diversification Opportunities for Encore Capital and Hawkins
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Encore and Hawkins is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins 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 Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of Encore Capital i.e., Encore Capital and Hawkins go up and down completely randomly.
Pair Corralation between Encore Capital and Hawkins
Given the investment horizon of 90 days Encore Capital is expected to generate 1.03 times less return on investment than Hawkins. But when comparing it to its historical volatility, Encore Capital Group is 1.7 times less risky than Hawkins. It trades about 0.18 of its potential returns per unit of risk. Hawkins is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 12,139 in Hawkins on August 24, 2024 and sell it today you would earn a total of 864.00 from holding Hawkins or generate 7.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. Hawkins
Performance |
| Timeline |
| Encore Capital Group |
| Hawkins |
Encore Capital and Hawkins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Hawkins
The main advantage of trading using opposite Encore Capital and Hawkins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Hawkins 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 Hawkins will offset losses from the drop in Hawkins' 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 |
| Hawkins vs. H B Fuller | Hawkins vs. Minerals Technologies | Hawkins vs. Quaker Chemical | Hawkins vs. Oil Dri |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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