Correlation Between Encore Capital and Visionary Education

Can any of the company-specific risk be diversified away by investing in both Encore Capital and Visionary Education 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 Encore Capital and Visionary Education into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Encore Capital Group and Visionary Education Technology, you can compare the effects of market volatilities on Encore Capital and Visionary Education 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 Encore Capital with a short position of Visionary Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and Visionary Education.

Diversification Opportunities for Encore Capital and Visionary Education

0.12

Correlation Coefficient

Encore Capital  Visionary Education

Average diversification

The 3 months correlation between Encore and Visionary is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Visionary Education Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visionary Education and Encore Capital 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 Encore Capital Group are associated (or correlated) with Visionary Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visionary Education has no effect on the direction of Encore Capital i.e., Encore Capital and Visionary Education go up and down completely randomly.

Pair Corralation between Encore Capital and Visionary Education

Given the investment horizon of 90 days Encore Capital is expected to generate 49.79 times less return on investment than Visionary Education. But when comparing it to its historical volatility, Encore Capital Group is 8.21 times less risky than Visionary Education. It trades about 0.02 of its potential returns per unit of risk. Visionary Education Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  249.00  in Visionary Education Technology on March 3, 2024 and sell it today you would earn a total of  152.00  from holding Visionary Education Technology or generate 61.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Encore Capital Group  vs.  Visionary Education Technology

Encore Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encore Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Visionary Education

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visionary Education Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Visionary Education showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Encore Capital and Visionary Education

The main advantage of trading using opposite Encore Capital and Visionary Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, Visionary Education 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 Visionary Education will offset losses from the drop in Visionary Education's long position.

The idea behind Encore Capital Group and Visionary Education Technology 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.