Correlation Between Encore Capital and WEC Energy
Can any of the company-specific risk be diversified away by investing in both Encore Capital and WEC Energy 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 WEC Energy 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 WEC Energy Group, you can compare the effects of market volatilities on Encore Capital and WEC Energy 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 WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and WEC Energy.
Diversification Opportunities for Encore Capital and WEC Energy
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Encore and WEC is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy 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 WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Encore Capital i.e., Encore Capital and WEC Energy go up and down completely randomly.
Pair Corralation between Encore Capital and WEC Energy
Given the investment horizon of 90 days Encore Capital is expected to generate 1.95 times less return on investment than WEC Energy. In addition to that, Encore Capital is 2.01 times more volatile than WEC Energy Group. It trades about 0.02 of its total potential returns per unit of risk. WEC Energy Group is currently generating about 0.08 per unit of volatility. If you would invest 8,103 in WEC Energy Group on September 4, 2024 and sell it today you would earn a total of 1,863 from holding WEC Energy Group or generate 22.99% 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. WEC Energy Group
Performance |
| Timeline |
| Encore Capital Group |
| WEC Energy Group |
Encore Capital and WEC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and WEC Energy
The main advantage of trading using opposite Encore Capital and WEC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, WEC Energy 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 WEC Energy will offset losses from the drop in WEC Energy'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 |
| WEC Energy vs. Alliant Energy Corp | WEC Energy vs. CMS Energy | WEC Energy vs. Exelon | WEC Energy vs. Evergy, |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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