Correlation Between Encore Capital and Iris Energy
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Iris Energy 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 Iris Energy 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 Iris Energy, you can compare the effects of market volatilities on Encore Capital and Iris Energy 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 Iris Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Iris Energy.
Diversification Opportunities for Encore Capital and Iris Energy
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Encore and Iris is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Iris Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Energy 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 Iris Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Energy has no effect on the direction of Encore Capital i.e., Encore Capital and Iris Energy go up and down completely randomly.
Pair Corralation between Encore Capital and Iris Energy
Given the investment horizon of 90 days Encore Capital Group is expected to generate 0.2 times more return on investment than Iris Energy. However, Encore Capital Group is 4.97 times less risky than Iris Energy. It trades about 0.11 of its potential returns per unit of risk. Iris Energy is currently generating about -0.03 per unit of risk. If you would invest 4,778 in Encore Capital Group on November 7, 2024 and sell it today you would earn a total of 146.00 from holding Encore Capital Group or generate 3.06% 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. Iris Energy
Performance |
| Timeline |
| Encore Capital Group |
| Iris Energy |
Encore Capital and Iris Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Iris Energy
The main advantage of trading using opposite Encore Capital and Iris Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Iris Energy 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 Iris Energy will offset losses from the drop in Iris Energy's long position.| Encore Capital vs. 360 Finance | Encore Capital vs. Atlanticus Holdings | Encore Capital vs. Qudian Inc | Encore Capital vs. Enova International |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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