Correlation Between Encore Capital and KVH Industries
Can any of the company-specific risk be diversified away by investing in both Encore Capital and KVH Industries 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 KVH Industries 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 KVH Industries, you can compare the effects of market volatilities on Encore Capital and KVH Industries 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 KVH Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and KVH Industries.
Diversification Opportunities for Encore Capital and KVH Industries
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Encore and KVH is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries 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 KVH Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KVH Industries has no effect on the direction of Encore Capital i.e., Encore Capital and KVH Industries go up and down completely randomly.
Pair Corralation between Encore Capital and KVH Industries
Given the investment horizon of 90 days Encore Capital is expected to generate 2.47 times less return on investment than KVH Industries. But when comparing it to its historical volatility, Encore Capital Group is 1.1 times less risky than KVH Industries. It trades about 0.2 of its potential returns per unit of risk. KVH Industries is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 460.00 in KVH Industries on September 2, 2024 and sell it today you would earn a total of 91.00 from holding KVH Industries or generate 19.78% 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. KVH Industries
Performance |
| Timeline |
| Encore Capital Group |
| KVH Industries |
Encore Capital and KVH Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and KVH Industries
The main advantage of trading using opposite Encore Capital and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, KVH Industries 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 KVH Industries will offset losses from the drop in KVH Industries' 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 |
| KVH Industries vs. Telesat Corp | KVH Industries vs. Comtech Telecommunications Corp | KVH Industries vs. Knowles Cor | KVH Industries vs. Ituran Location and |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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