Correlation Between Encore Capital and 10X Capital

Can any of the company-specific risk be diversified away by investing in both Encore Capital and 10X 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 Encore Capital and 10X Capital 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 10X Capital Venture, you can compare the effects of market volatilities on Encore Capital and 10X 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 Encore Capital with a short position of 10X Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Capital and 10X Capital.

Diversification Opportunities for Encore Capital and 10X Capital

-0.22

Correlation Coefficient

Encore Capital  10X Capital

Very good diversification

The 3 months correlation between Encore and 10X is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and 10X Capital Venture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 10X Capital Venture 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 10X Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 10X Capital Venture has no effect on the direction of Encore Capital i.e., Encore Capital and 10X Capital go up and down completely randomly.

Pair Corralation between Encore Capital and 10X Capital

Given the investment horizon of 90 days Encore Capital Group is expected to under-perform the 10X Capital. In addition to that, Encore Capital is 9.98 times more volatile than 10X Capital Venture. It trades about -0.06 of its total potential returns per unit of risk. 10X Capital Venture is currently generating about 0.12 per unit of volatility. If you would invest  1,078  in 10X Capital Venture on February 23, 2024 and sell it today you would earn a total of  20.00  from holding 10X Capital Venture or generate 1.86% return on investment over 90 days.

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

Encore Capital Group  vs.  10X Capital Venture

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 unsteady 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.

10X Capital Venture

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 10X Capital Venture are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 10X Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Encore Capital and 10X Capital

The main advantage of trading using opposite Encore Capital and 10X Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Capital position performs unexpectedly, 10X 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 10X Capital will offset losses from the drop in 10X Capital's long position.

The idea behind Encore Capital Group and 10X Capital Venture 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 Anywhere module to track or share privately all of your investments from the convenience of any device.