Correlation Between The9 and Encore Capital
Can any of the company-specific risk be diversified away by investing in both The9 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 The9 and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The9 Ltd ADR and Encore Capital Group, you can compare the effects of market volatilities on The9 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 The9 with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of The9 and Encore Capital.
Diversification Opportunities for The9 and Encore Capital
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between The9 and Encore is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding The9 Ltd ADR 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 The9 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 The9 Ltd ADR 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 The9 i.e., The9 and Encore Capital go up and down completely randomly.
Pair Corralation between The9 and Encore Capital
Given the investment horizon of 90 days The9 Ltd ADR is expected to generate 2.31 times more return on investment than Encore Capital. However, The9 is 2.31 times more volatile than Encore Capital Group. It trades about 0.14 of its potential returns per unit of risk. Encore Capital Group is currently generating about 0.05 per unit of risk. If you would invest 740.00 in The9 Ltd ADR on September 1, 2024 and sell it today you would earn a total of 735.00 from holding The9 Ltd ADR or generate 99.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The9 Ltd ADR vs. Encore Capital Group
Performance |
| Timeline |
| The9 Ltd ADR |
| Encore Capital Group |
The9 and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The9 and Encore Capital
The main advantage of trading using opposite The9 and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The9 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.| The9 vs. Atari SA | The9 vs. Victory Square Technologies | The9 vs. Motorsport Gaming Us | The9 vs. Alpha Esports Tech |
| 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |