Correlation Between Encore Capital and Altisource Asset

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

Diversification Opportunities for Encore Capital and Altisource Asset

0.29

Correlation Coefficient

Encore Capital  Altisource Asset

Modest diversification

The 3 months correlation between Encore and Altisource is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Encore Capital Group and Altisource Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altisource Asset Man 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 Altisource Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altisource Asset Man has no effect on the direction of Encore Capital i.e., Encore Capital and Altisource Asset go up and down completely randomly.

Pair Corralation between Encore Capital and Altisource Asset

Given the investment horizon of 90 days Encore Capital Group is expected to generate 0.32 times more return on investment than Altisource Asset. However, Encore Capital Group is 3.14 times less risky than Altisource Asset. It trades about -0.37 of its potential returns per unit of risk. Altisource Asset Management is currently generating about -0.19 per unit of risk. If you would invest  4,731  in Encore Capital Group on March 13, 2024 and sell it today you would lose (583.00) from holding Encore Capital Group or give up 12.32% of portfolio value over 90 days.

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

Encore Capital Group  vs.  Altisource Asset Management

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

Altisource Asset Man

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altisource Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Encore Capital and Altisource Asset

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

The idea behind Encore Capital Group and Altisource Asset Management 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.