Correlation Between Encore Capital and VentureNet Capital

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

Diversification Opportunities for Encore Capital and VentureNet Capital

-0.37

Correlation Coefficient

Encore Capital  VentureNet Capital

Very good diversification

The 3 months correlation between Encore and VentureNet is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and VentureNet Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VentureNet Capital 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 VentureNet Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VentureNet Capital has no effect on the direction of Encore Capital i.e., Encore Capital and VentureNet Capital go up and down completely randomly.

Pair Corralation between Encore Capital and VentureNet Capital

Given the investment horizon of 90 days Encore Capital Group is expected to generate 0.26 times more return on investment than VentureNet Capital. However, Encore Capital Group is 3.85 times less risky than VentureNet Capital. It trades about 0.01 of its potential returns per unit of risk. VentureNet Capital Group is currently generating about -0.12 per unit of risk. If you would invest  4,917  in Encore Capital Group on September 17, 2024 and sell it today you would earn a total of  6.00  from holding Encore Capital Group or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Encore Capital Group  vs.  VentureNet Capital Group

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 nearly stable basic indicators, Encore Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

VentureNet Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VentureNet Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Encore Capital and VentureNet Capital

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

The idea behind Encore Capital Group and VentureNet 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.