Correlation Between Boston Beer and Encore Capital
Can any of the company-specific risk be diversified away by investing in both Boston Beer 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 Boston Beer and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Encore Capital Group, you can compare the effects of market volatilities on Boston Beer 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 Boston Beer with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Encore Capital.
Diversification Opportunities for Boston Beer and Encore Capital
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Boston and Encore is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer 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 Boston Beer 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 Boston Beer 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 Boston Beer i.e., Boston Beer and Encore Capital go up and down completely randomly.
Pair Corralation between Boston Beer and Encore Capital
Considering the 90-day investment horizon Boston Beer is expected to generate 1.1 times more return on investment than Encore Capital. However, Boston Beer is 1.1 times more volatile than Encore Capital Group. It trades about 0.06 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 26,820 in Boston Beer on September 3, 2024 and sell it today you would earn a total of 4,804 from holding Boston Beer or generate 17.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Encore Capital Group
Performance |
| Timeline |
| Boston Beer |
| Encore Capital Group |
Boston Beer and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Encore Capital
The main advantage of trading using opposite Boston Beer and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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.| Boston Beer vs. Anheuser Busch Inbev | Boston Beer vs. Molson Coors Beverage | Boston Beer vs. Heineken NV | Boston Beer vs. Ambev SA ADR |
| 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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