Correlation Between Ralph Lauren and Encore Capital
Can any of the company-specific risk be diversified away by investing in both Ralph Lauren 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 Ralph Lauren and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ralph Lauren Corp and Encore Capital Group, you can compare the effects of market volatilities on Ralph Lauren 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 Ralph Lauren with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ralph Lauren and Encore Capital.
Diversification Opportunities for Ralph Lauren and Encore Capital
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ralph and Encore is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp 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 Ralph Lauren 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 Ralph Lauren Corp 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 Ralph Lauren i.e., Ralph Lauren and Encore Capital go up and down completely randomly.
Pair Corralation between Ralph Lauren and Encore Capital
Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to generate 0.91 times more return on investment than Encore Capital. However, Ralph Lauren Corp is 1.1 times less risky than Encore Capital. It trades about 0.13 of its potential returns per unit of risk. Encore Capital Group is currently generating about 0.02 per unit of risk. If you would invest 12,939 in Ralph Lauren Corp on September 3, 2024 and sell it today you would earn a total of 10,402 from holding Ralph Lauren Corp or generate 80.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ralph Lauren Corp vs. Encore Capital Group
Performance |
| Timeline |
| Ralph Lauren Corp |
| Encore Capital Group |
Ralph Lauren and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ralph Lauren and Encore Capital
The main advantage of trading using opposite Ralph Lauren and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ralph Lauren 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.| Ralph Lauren vs. Columbia Sportswear | Ralph Lauren vs. Kontoor Brands | Ralph Lauren vs. Levi Strauss Co | Ralph Lauren vs. G III Apparel Group |
| 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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