Correlation Between Encore Capital and WPP PLC
Can any of the company-specific risk be diversified away by investing in both Encore Capital and WPP PLC 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 WPP PLC 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 WPP PLC ADR, you can compare the effects of market volatilities on Encore Capital and WPP PLC 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 WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and WPP PLC.
Diversification Opportunities for Encore Capital and WPP PLC
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Encore and WPP is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and WPP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC ADR 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 WPP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP PLC ADR has no effect on the direction of Encore Capital i.e., Encore Capital and WPP PLC go up and down completely randomly.
Pair Corralation between Encore Capital and WPP PLC
Given the investment horizon of 90 days Encore Capital Group is expected to under-perform the WPP PLC. In addition to that, Encore Capital is 1.12 times more volatile than WPP PLC ADR. It trades about 0.0 of its total potential returns per unit of risk. WPP PLC ADR is currently generating about 0.14 per unit of volatility. If you would invest 4,686 in WPP PLC ADR on August 30, 2024 and sell it today you would earn a total of 685.00 from holding WPP PLC ADR or generate 14.62% 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. WPP PLC ADR
Performance |
| Timeline |
| Encore Capital Group |
| WPP PLC ADR |
Encore Capital and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and WPP PLC
The main advantage of trading using opposite Encore Capital and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, WPP PLC 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 WPP PLC will offset losses from the drop in WPP PLC'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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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