Correlation Between Analog Devices and Encore Capital
Can any of the company-specific risk be diversified away by investing in both Analog Devices 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 Analog Devices and Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and Encore Capital Group, you can compare the effects of market volatilities on Analog Devices 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 Analog Devices with a short position of Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Encore Capital.
Diversification Opportunities for Analog Devices and Encore Capital
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Analog and Encore is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices 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 Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and Encore Capital go up and down completely randomly.
Pair Corralation between Analog Devices and Encore Capital
Considering the 90-day investment horizon Analog Devices is expected to generate 0.86 times more return on investment than Encore Capital. However, Analog Devices is 1.17 times less risky than Encore Capital. It trades about 0.4 of its potential returns per unit of risk. Encore Capital Group is currently generating about 0.29 per unit of risk. If you would invest 21,804 in Analog Devices on April 6, 2025 and sell it today you would earn a total of 2,764 from holding Analog Devices or generate 12.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. Encore Capital Group
Performance |
| Timeline |
| Analog Devices |
| Encore Capital Group |
Analog Devices and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and Encore Capital
The main advantage of trading using opposite Analog Devices and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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.| Analog Devices vs. Gevo Inc | Analog Devices vs. Sandstorm Gold Ltd | Analog Devices vs. Flexible Solutions International | Analog Devices vs. Avient Corp |
| Encore Capital vs. Allient | Encore Capital vs. CTS Corporation | Encore Capital vs. Paiute Oil Mining | Encore Capital vs. Eagle Mountain Mining |
Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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