Correlation Between Encore Capital and Sumitomo Electric
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Sumitomo Electric 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 Sumitomo Electric 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 Sumitomo Electric Industries, you can compare the effects of market volatilities on Encore Capital and Sumitomo Electric 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 Sumitomo Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Sumitomo Electric.
Diversification Opportunities for Encore Capital and Sumitomo Electric
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Encore and Sumitomo is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Sumitomo Electric Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Electric 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 Sumitomo Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Electric has no effect on the direction of Encore Capital i.e., Encore Capital and Sumitomo Electric go up and down completely randomly.
Pair Corralation between Encore Capital and Sumitomo Electric
Given the investment horizon of 90 days Encore Capital is expected to generate 8.45 times less return on investment than Sumitomo Electric. In addition to that, Encore Capital is 1.91 times more volatile than Sumitomo Electric Industries. It trades about 0.01 of its total potential returns per unit of risk. Sumitomo Electric Industries is currently generating about 0.08 per unit of volatility. If you would invest 1,216 in Sumitomo Electric Industries on August 26, 2024 and sell it today you would earn a total of 441.00 from holding Sumitomo Electric Industries or generate 36.27% 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. Sumitomo Electric Industries
Performance |
| Timeline |
| Encore Capital Group |
| Sumitomo Electric |
Encore Capital and Sumitomo Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Sumitomo Electric
The main advantage of trading using opposite Encore Capital and Sumitomo Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Sumitomo Electric 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 Sumitomo Electric will offset losses from the drop in Sumitomo Electric'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 |
| Sumitomo Electric vs. Getty Images Holdings | Sumitomo Electric vs. Glacier Bancorp | Sumitomo Electric vs. Juniata Valley Financial | Sumitomo Electric vs. Encore Capital Group |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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