Correlation Between Encore Capital and National CineMedia
Can any of the company-specific risk be diversified away by investing in both Encore Capital and National CineMedia 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 National CineMedia 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 National CineMedia, you can compare the effects of market volatilities on Encore Capital and National CineMedia 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 National CineMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and National CineMedia.
Diversification Opportunities for Encore Capital and National CineMedia
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Encore and National is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia 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 National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of Encore Capital i.e., Encore Capital and National CineMedia go up and down completely randomly.
Pair Corralation between Encore Capital and National CineMedia
Given the investment horizon of 90 days Encore Capital Group is expected to generate 0.61 times more return on investment than National CineMedia. However, Encore Capital Group is 1.64 times less risky than National CineMedia. It trades about 0.19 of its potential returns per unit of risk. National CineMedia is currently generating about -0.05 per unit of risk. If you would invest 4,584 in Encore Capital Group on August 30, 2024 and sell it today you would earn a total of 354.00 from holding Encore Capital Group or generate 7.72% 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. National CineMedia
Performance |
| Timeline |
| Encore Capital Group |
| National CineMedia |
Encore Capital and National CineMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and National CineMedia
The main advantage of trading using opposite Encore Capital and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, National CineMedia 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 National CineMedia will offset losses from the drop in National CineMedia's 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 |
| National CineMedia vs. Capital Income Builder | National CineMedia vs. Direxion Daily FTSE | National CineMedia vs. Dodge Global Stock | National CineMedia vs. Collegium Pharmaceutical |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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