Correlation Between Guild HoldingsCo and Encore Capital

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

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

Diversification Opportunities for Guild HoldingsCo and Encore Capital

0.39

Correlation Coefficient

Guild HoldingsCo  Encore Capital

Weak diversification

The 3 months correlation between Guild and Encore is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Guild HoldingsCo 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 Guild HoldingsCo 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 Guild HoldingsCo 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 Guild HoldingsCo i.e., Guild HoldingsCo and Encore Capital go up and down completely randomly.

Pair Corralation between Guild HoldingsCo and Encore Capital

Given the investment horizon of 90 days Guild HoldingsCo is expected to generate 1.33 times more return on investment than Encore Capital. However, Guild HoldingsCo is 1.33 times more volatile than Encore Capital Group. It trades about 0.05 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  856.00  in Guild HoldingsCo on February 4, 2024 and sell it today you would earn a total of  542.00  from holding Guild HoldingsCo or generate 63.32% return on investment over 90 days.

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

Guild HoldingsCo  vs.  Encore Capital Group

Guild HoldingsCo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guild HoldingsCo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Guild HoldingsCo is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Guild HoldingsCo and Encore Capital

The main advantage of trading using opposite Guild HoldingsCo and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guild HoldingsCo 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.

The idea behind Guild HoldingsCo 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.