Correlation Between Encore Capital and Stepstone
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Stepstone 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 Stepstone 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 Stepstone Group, you can compare the effects of market volatilities on Encore Capital and Stepstone 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 Stepstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Stepstone.
Diversification Opportunities for Encore Capital and Stepstone
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Encore and Stepstone is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group 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 Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Encore Capital i.e., Encore Capital and Stepstone go up and down completely randomly.
Pair Corralation between Encore Capital and Stepstone
Given the investment horizon of 90 days Encore Capital is expected to generate 23.25 times less return on investment than Stepstone. But when comparing it to its historical volatility, Encore Capital Group is 1.04 times less risky than Stepstone. It trades about 0.01 of its potential returns per unit of risk. Stepstone Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,561 in Stepstone Group on November 5, 2024 and sell it today you would earn a total of 2,744 from holding Stepstone Group or generate 77.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. Stepstone Group
Performance |
| Timeline |
| Encore Capital Group |
| Stepstone Group |
Encore Capital and Stepstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Stepstone
The main advantage of trading using opposite Encore Capital and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Stepstone 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 Stepstone will offset losses from the drop in Stepstone'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 |
| Stepstone vs. Munivest Fund | Stepstone vs. Blackrock Muniyield Quality | Stepstone vs. Federated Investors B | Stepstone vs. Federated Premier Municipal |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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