Correlation Between Old Republic and Encore Capital
Can any of the company-specific risk be diversified away by investing in both Old Republic 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 Old Republic and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Republic International and Encore Capital Group, you can compare the effects of market volatilities on Old Republic 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 Old Republic with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Republic and Encore Capital.
Diversification Opportunities for Old Republic and Encore Capital
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Old and Encore is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic 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 Old Republic 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 Old Republic 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 Old Republic i.e., Old Republic and Encore Capital go up and down completely randomly.
Pair Corralation between Old Republic and Encore Capital
Considering the 90-day investment horizon Old Republic International is expected to generate 0.51 times more return on investment than Encore Capital. However, Old Republic International is 1.98 times less risky than Encore Capital. It trades about 0.12 of its potential returns per unit of risk. Encore Capital Group is currently generating about 0.01 per unit of risk. If you would invest 2,429 in Old Republic International on August 31, 2024 and sell it today you would earn a total of 1,468 from holding Old Republic International or generate 60.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Republic International vs. Encore Capital Group
Performance |
| Timeline |
| Old Republic Interna |
| Encore Capital Group |
Old Republic and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Republic and Encore Capital
The main advantage of trading using opposite Old Republic and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Republic 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.| Old Republic vs. American International Group | Old Republic vs. Hartford Financial Services | Old Republic vs. Goosehead Insurance | Old Republic vs. Enstar Group Limited |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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