Correlation Between Encore Capital and NextNav Warrant
Can any of the company-specific risk be diversified away by investing in both Encore Capital and NextNav Warrant 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 NextNav Warrant 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 NextNav Warrant, you can compare the effects of market volatilities on Encore Capital and NextNav Warrant 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 NextNav Warrant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and NextNav Warrant.
Diversification Opportunities for Encore Capital and NextNav Warrant
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Encore and NextNav is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and NextNav Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextNav Warrant 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 NextNav Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextNav Warrant has no effect on the direction of Encore Capital i.e., Encore Capital and NextNav Warrant go up and down completely randomly.
Pair Corralation between Encore Capital and NextNav Warrant
Given the investment horizon of 90 days Encore Capital Group is expected to under-perform the NextNav Warrant. But the stock apears to be less risky and, when comparing its historical volatility, Encore Capital Group is 2.5 times less risky than NextNav Warrant. The stock trades about -0.01 of its potential returns per unit of risk. The NextNav Warrant is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 63.00 in NextNav Warrant on December 1, 2024 and sell it today you would earn a total of 281.00 from holding NextNav Warrant or generate 446.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 92.71% |
| Values | Daily Returns |
Encore Capital Group vs. NextNav Warrant
Performance |
| Timeline |
| Encore Capital Group |
| NextNav Warrant |
Encore Capital and NextNav Warrant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and NextNav Warrant
The main advantage of trading using opposite Encore Capital and NextNav Warrant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, NextNav Warrant 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 NextNav Warrant will offset losses from the drop in NextNav Warrant'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 |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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