Correlation Between Encore Capital and Steven Madden
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Steven Madden 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 Steven Madden 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 Steven Madden, you can compare the effects of market volatilities on Encore Capital and Steven Madden 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 Steven Madden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Steven Madden.
Diversification Opportunities for Encore Capital and Steven Madden
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Encore and Steven is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Encore Capital i.e., Encore Capital and Steven Madden go up and down completely randomly.
Pair Corralation between Encore Capital and Steven Madden
Given the investment horizon of 90 days Encore Capital is expected to generate 3.79 times less return on investment than Steven Madden. In addition to that, Encore Capital is 1.22 times more volatile than Steven Madden. It trades about 0.01 of its total potential returns per unit of risk. Steven Madden is currently generating about 0.05 per unit of volatility. If you would invest 3,174 in Steven Madden on September 2, 2024 and sell it today you would earn a total of 1,384 from holding Steven Madden or generate 43.6% 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. Steven Madden
Performance |
| Timeline |
| Encore Capital Group |
| Steven Madden |
Encore Capital and Steven Madden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Steven Madden
The main advantage of trading using opposite Encore Capital and Steven Madden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Steven Madden 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 Steven Madden will offset losses from the drop in Steven Madden'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 |
| Steven Madden vs. Weyco Group | Steven Madden vs. Caleres | Steven Madden vs. Rocky Brands | Steven Madden vs. Designer Brands |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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