Correlation Between Encore Capital and Western Union
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Western Union 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 Western Union 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 Western Union Co, you can compare the effects of market volatilities on Encore Capital and Western Union 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 Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Western Union.
Diversification Opportunities for Encore Capital and Western Union
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Encore and Western is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Western Union Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union 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 Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of Encore Capital i.e., Encore Capital and Western Union go up and down completely randomly.
Pair Corralation between Encore Capital and Western Union
Given the investment horizon of 90 days Encore Capital Group is expected to generate 1.39 times more return on investment than Western Union. However, Encore Capital is 1.39 times more volatile than Western Union Co. It trades about 0.01 of its potential returns per unit of risk. Western Union Co is currently generating about 0.0 per unit of risk. If you would invest 4,949 in Encore Capital Group on August 29, 2024 and sell it today you would lose (11.00) from holding Encore Capital Group or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. Western Union Co
Performance |
| Timeline |
| Encore Capital Group |
| Western Union |
Encore Capital and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Western Union
The main advantage of trading using opposite Encore Capital and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Western Union 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 Western Union will offset losses from the drop in Western Union'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 |
| Western Union vs. American Express | Western Union vs. PayPal Holdings | Western Union vs. Capital One Financial | Western Union vs. Upstart Holdings |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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