Correlation Between Encore Capital and MFS Charter
Can any of the company-specific risk be diversified away by investing in both Encore Capital and MFS Charter 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 MFS Charter 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 MFS Charter Income, you can compare the effects of market volatilities on Encore Capital and MFS Charter 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 MFS Charter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and MFS Charter.
Diversification Opportunities for Encore Capital and MFS Charter
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Encore and MFS is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and MFS Charter Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Charter Income 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 MFS Charter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Charter Income has no effect on the direction of Encore Capital i.e., Encore Capital and MFS Charter go up and down completely randomly.
Pair Corralation between Encore Capital and MFS Charter
Given the investment horizon of 90 days Encore Capital is expected to generate 1.47 times less return on investment than MFS Charter. In addition to that, Encore Capital is 2.17 times more volatile than MFS Charter Income. It trades about 0.01 of its total potential returns per unit of risk. MFS Charter Income is currently generating about 0.05 per unit of volatility. If you would invest 518.00 in MFS Charter Income on September 14, 2024 and sell it today you would earn a total of 119.00 from holding MFS Charter Income or generate 22.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. MFS Charter Income
Performance |
| Timeline |
| Encore Capital Group |
| MFS Charter Income |
Encore Capital and MFS Charter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and MFS Charter
The main advantage of trading using opposite Encore Capital and MFS Charter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, MFS Charter 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 MFS Charter will offset losses from the drop in MFS Charter's long position.| Encore Capital vs. Visa Class A | Encore Capital vs. PayPal Holdings | Encore Capital vs. Upstart Holdings | Encore Capital vs. Mastercard |
| MFS Charter vs. MFS High Income | MFS Charter vs. MFS Investment Grade | MFS Charter vs. Eaton Vance National | MFS Charter vs. MFS High Yield |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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