Correlation Between Encore Capital and BBB Foods
Can any of the company-specific risk be diversified away by investing in both Encore Capital and BBB Foods 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 BBB Foods 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 BBB Foods, you can compare the effects of market volatilities on Encore Capital and BBB Foods 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 BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and BBB Foods.
Diversification Opportunities for Encore Capital and BBB Foods
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Encore and BBB is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Encore Capital i.e., Encore Capital and BBB Foods go up and down completely randomly.
Pair Corralation between Encore Capital and BBB Foods
Given the investment horizon of 90 days Encore Capital Group is expected to generate 0.73 times more return on investment than BBB Foods. However, Encore Capital Group is 1.37 times less risky than BBB Foods. It trades about 0.13 of its potential returns per unit of risk. BBB Foods is currently generating about 0.08 per unit of risk. If you would invest 4,778 in Encore Capital Group on November 7, 2024 and sell it today you would earn a total of 172.00 from holding Encore Capital Group or generate 3.6% 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. BBB Foods
Performance |
| Timeline |
| Encore Capital Group |
| BBB Foods |
Encore Capital and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and BBB Foods
The main advantage of trading using opposite Encore Capital and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, BBB Foods 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 BBB Foods will offset losses from the drop in BBB Foods' long position.| Encore Capital vs. 360 Finance | Encore Capital vs. Atlanticus Holdings | Encore Capital vs. Qudian Inc | Encore Capital vs. Enova International |
| BBB Foods vs. Western Acquisition Ventures | BBB Foods vs. Inflection Point Acquisition | BBB Foods vs. Viemed Healthcare | BBB Foods vs. Sonida Senior Living |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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