Correlation Between Encore Capital and KLA Tencor
Can any of the company-specific risk be diversified away by investing in both Encore Capital and KLA Tencor 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 KLA Tencor 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 KLA Tencor, you can compare the effects of market volatilities on Encore Capital and KLA Tencor 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 KLA Tencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and KLA Tencor.
Diversification Opportunities for Encore Capital and KLA Tencor
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Encore and KLA is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor 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 KLA Tencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Tencor has no effect on the direction of Encore Capital i.e., Encore Capital and KLA Tencor go up and down completely randomly.
Pair Corralation between Encore Capital and KLA Tencor
Given the investment horizon of 90 days Encore Capital Group is expected to generate 0.65 times more return on investment than KLA Tencor. However, Encore Capital Group is 1.53 times less risky than KLA Tencor. It trades about 0.03 of its potential returns per unit of risk. KLA Tencor is currently generating about -0.05 per unit of risk. If you would invest 4,880 in Encore Capital Group on September 13, 2024 and sell it today you would earn a total of 26.00 from holding Encore Capital Group or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. KLA Tencor
Performance |
| Timeline |
| Encore Capital Group |
| KLA Tencor |
Encore Capital and KLA Tencor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and KLA Tencor
The main advantage of trading using opposite Encore Capital and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, KLA Tencor 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 KLA Tencor will offset losses from the drop in KLA Tencor's long position.| Encore Capital vs. Visa Class A | Encore Capital vs. PayPal Holdings | Encore Capital vs. Upstart Holdings | Encore Capital vs. Mastercard |
| KLA Tencor vs. Applied Materials | KLA Tencor vs. ASML Holding NV | KLA Tencor vs. Axcelis Technologies | KLA Tencor vs. Teradyne |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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