Correlation Between 693304AT4 and Encore Capital

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Can any of the company-specific risk be diversified away by investing in both 693304AT4 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 693304AT4 and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PECO ENERGY 315 and Encore Capital Group, you can compare the effects of market volatilities on 693304AT4 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 693304AT4 with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of 693304AT4 and Encore Capital.

Diversification Opportunities for 693304AT4 and Encore Capital

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between 693304AT4 and Encore is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding PECO ENERGY 315 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 693304AT4 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 PECO ENERGY 315 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 693304AT4 i.e., 693304AT4 and Encore Capital go up and down completely randomly.

Pair Corralation between 693304AT4 and Encore Capital

Assuming the 90 days trading horizon PECO ENERGY 315 is expected to under-perform the Encore Capital. But the bond apears to be less risky and, when comparing its historical volatility, PECO ENERGY 315 is 3.13 times less risky than Encore Capital. The bond trades about -0.12 of its potential returns per unit of risk. The Encore Capital Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,587  in Encore Capital Group on September 12, 2024 and sell it today you would earn a total of  294.00  from holding Encore Capital Group or generate 6.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy89.06%
ValuesDaily Returns

PECO ENERGY 315  vs.  Encore Capital Group

 Performance 
       Timeline  
PECO ENERGY 315 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PECO ENERGY 315 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 693304AT4 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Encore Capital Group 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Encore Capital Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Encore Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

693304AT4 and Encore Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 693304AT4 and Encore Capital

The main advantage of trading using opposite 693304AT4 and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 693304AT4 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.
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The idea behind PECO ENERGY 315 and Encore Capital Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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