Correlation Between IPG Photonics and Encore Capital
Can any of the company-specific risk be diversified away by investing in both IPG Photonics 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 IPG Photonics and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Encore Capital Group, you can compare the effects of market volatilities on IPG Photonics 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 IPG Photonics with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Encore Capital.
Diversification Opportunities for IPG Photonics and Encore Capital
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between IPG and Encore is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics 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 IPG Photonics 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 IPG Photonics 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 IPG Photonics i.e., IPG Photonics and Encore Capital go up and down completely randomly.
Pair Corralation between IPG Photonics and Encore Capital
Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Encore Capital. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.05 times less risky than Encore Capital. The stock trades about -0.02 of its potential returns per unit of risk. The Encore Capital Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4,800 in Encore Capital Group on August 27, 2024 and sell it today you would earn a total of 114.00 from holding Encore Capital Group or generate 2.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IPG Photonics vs. Encore Capital Group
Performance |
| Timeline |
| IPG Photonics |
| Encore Capital Group |
IPG Photonics and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Encore Capital
The main advantage of trading using opposite IPG Photonics and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics 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.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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