Correlation Between NYSE Composite and Encore Capital
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Encore Capital Group, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Encore Capital.
Diversification Opportunities for NYSE Composite and Encore Capital
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NYSE and Encore is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Encore Capital go up and down completely randomly.
Pair Corralation between NYSE Composite and Encore Capital
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.98 times less return on investment than Encore Capital. But when comparing it to its historical volatility, NYSE Composite is 2.78 times less risky than Encore Capital. It trades about 0.24 of its potential returns per unit of risk. Encore Capital Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,608 in Encore Capital Group on August 27, 2024 and sell it today you would earn a total of 306.00 from holding Encore Capital Group or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Encore Capital Group
Performance |
| Timeline |
NYSE Composite and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Encore Capital Group
Pair trading matchups for Encore Capital
Pair Trading with NYSE Composite and Encore Capital
The main advantage of trading using opposite NYSE Composite and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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