Correlation Between Encore Capital and Virco Manufacturing
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Virco Manufacturing 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 Virco Manufacturing 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 Virco Manufacturing, you can compare the effects of market volatilities on Encore Capital and Virco Manufacturing 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 Virco Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Virco Manufacturing.
Diversification Opportunities for Encore Capital and Virco Manufacturing
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Encore and Virco is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Virco Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virco Manufacturing 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 Virco Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virco Manufacturing has no effect on the direction of Encore Capital i.e., Encore Capital and Virco Manufacturing go up and down completely randomly.
Pair Corralation between Encore Capital and Virco Manufacturing
Given the investment horizon of 90 days Encore Capital is expected to generate 17.4 times less return on investment than Virco Manufacturing. But when comparing it to its historical volatility, Encore Capital Group is 1.94 times less risky than Virco Manufacturing. It trades about 0.01 of its potential returns per unit of risk. Virco Manufacturing is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 448.00 in Virco Manufacturing on November 19, 2024 and sell it today you would earn a total of 719.00 from holding Virco Manufacturing or generate 160.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. Virco Manufacturing
Performance |
| Timeline |
| Encore Capital Group |
| Virco Manufacturing |
Encore Capital and Virco Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Virco Manufacturing
The main advantage of trading using opposite Encore Capital and Virco Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Virco Manufacturing 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 Virco Manufacturing will offset losses from the drop in Virco Manufacturing's long position.| Encore Capital vs. Visa Class A | Encore Capital vs. PayPal Holdings | Encore Capital vs. Capital One Financial | Encore Capital vs. Upstart Holdings |
| Virco Manufacturing vs. Bassett Furniture Industries | Virco Manufacturing vs. Hooker Furniture | Virco Manufacturing vs. Natuzzi SpA | Virco Manufacturing vs. Flexsteel Industries |
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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