Correlation Between Encore Capital and SNDL
Can any of the company-specific risk be diversified away by investing in both Encore Capital and SNDL 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 SNDL 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 SNDL Inc, you can compare the effects of market volatilities on Encore Capital and SNDL 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 SNDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and SNDL.
Diversification Opportunities for Encore Capital and SNDL
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Encore and SNDL is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Encore Capital i.e., Encore Capital and SNDL go up and down completely randomly.
Pair Corralation between Encore Capital and SNDL
Given the investment horizon of 90 days Encore Capital is expected to generate 4.04 times less return on investment than SNDL. But when comparing it to its historical volatility, Encore Capital Group is 1.92 times less risky than SNDL. It trades about 0.01 of its potential returns per unit of risk. SNDL Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 213.00 in SNDL Inc on August 31, 2024 and sell it today you would lose (20.00) from holding SNDL Inc or give up 9.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. SNDL Inc
Performance |
| Timeline |
| Encore Capital Group |
| SNDL Inc |
Encore Capital and SNDL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and SNDL
The main advantage of trading using opposite Encore Capital and SNDL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, SNDL 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 SNDL will offset losses from the drop in SNDL'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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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