Correlation Between Encore Wire and BNC Bancorp

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

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

Diversification Opportunities for Encore Wire and BNC Bancorp

0.0

Correlation Coefficient

Encore Wire  BNC Bancorp

Pay attention - limited upside

The 3 months correlation between Encore and BNC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Encore Wire and BNC Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNC Bancorp and Encore Wire 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 Wire are associated (or correlated) with BNC Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNC Bancorp has no effect on the direction of Encore Wire i.e., Encore Wire and BNC Bancorp go up and down completely randomly.

Pair Corralation between Encore Wire and BNC Bancorp

If you would invest  24,155  in Encore Wire on January 31, 2024 and sell it today you would earn a total of  4,148  from holding Encore Wire or generate 17.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Encore Wire  vs.  BNC Bancorp

Encore Wire

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Encore Wire are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Encore Wire exhibited solid returns over the last few months and may actually be approaching a breakup point.

BNC Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNC Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, BNC Bancorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Encore Wire and BNC Bancorp

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

The idea behind Encore Wire and BNC Bancorp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.