Correlation Between Encore Capital and Zhihu
Can any of the company-specific risk be diversified away by investing in both Encore Capital and Zhihu 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 Zhihu 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 Zhihu Inc ADR, you can compare the effects of market volatilities on Encore Capital and Zhihu 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 Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Zhihu.
Diversification Opportunities for Encore Capital and Zhihu
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Encore and Zhihu is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Zhihu Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhihu Inc 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 Zhihu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhihu Inc ADR has no effect on the direction of Encore Capital i.e., Encore Capital and Zhihu go up and down completely randomly.
Pair Corralation between Encore Capital and Zhihu
Given the investment horizon of 90 days Encore Capital Group is expected to generate 0.45 times more return on investment than Zhihu. However, Encore Capital Group is 2.23 times less risky than Zhihu. It trades about 0.19 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.07 per unit of risk. If you would invest 4,584 in Encore Capital Group on August 30, 2024 and sell it today you would earn a total of 354.00 from holding Encore Capital Group or generate 7.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Encore Capital Group vs. Zhihu Inc ADR
Performance |
| Timeline |
| Encore Capital Group |
| Zhihu Inc ADR |
Encore Capital and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Capital and Zhihu
The main advantage of trading using opposite Encore Capital and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Zhihu 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 Zhihu will offset losses from the drop in Zhihu'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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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