Correlation Between Enova International and Encore Capital
Can any of the company-specific risk be diversified away by investing in both Enova International and Encore Capital 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 Enova International and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enova International and Encore Capital Group, you can compare the effects of market volatilities on Enova International and Encore Capital 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 Enova International with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enova International and Encore Capital.
Diversification Opportunities for Enova International and Encore Capital
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Enova and Encore is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Enova International and Encore Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encore Capital Group and Enova International 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 Enova International are associated (or correlated) with Encore Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encore Capital Group has no effect on the direction of Enova International i.e., Enova International and Encore Capital go up and down completely randomly.
Pair Corralation between Enova International and Encore Capital
Given the investment horizon of 90 days Enova International is expected to generate 1.47 times more return on investment than Encore Capital. However, Enova International is 1.47 times more volatile than Encore Capital Group. It trades about 0.36 of its potential returns per unit of risk. Encore Capital Group is currently generating about 0.2 per unit of risk. If you would invest 8,691 in Enova International on September 1, 2024 and sell it today you would earn a total of 1,860 from holding Enova International or generate 21.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enova International vs. Encore Capital Group
Performance |
| Timeline |
| Enova International |
| Encore Capital Group |
Enova International and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enova International and Encore Capital
The main advantage of trading using opposite Enova International and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enova International position performs unexpectedly, Encore Capital 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 Encore Capital will offset losses from the drop in Encore Capital's long position.| Enova International vs. Regional Management Corp | Enova International vs. Encore Capital Group | Enova International vs. Customers Bancorp | Enova International vs. Employers Holdings |
| Encore Capital vs. 360 Finance | Encore Capital vs. Atlanticus Holdings | Encore Capital vs. Qudian Inc | Encore Capital vs. Enova International |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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