Correlation Between AG Mortgage and Encore Capital

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

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

Diversification Opportunities for AG Mortgage and Encore Capital

0.77

Correlation Coefficient

AG Mortgage  Encore Capital

Poor diversification

The 3 months correlation between MITN and Encore is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment 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 AG Mortgage 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 AG Mortgage Investment 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 AG Mortgage i.e., AG Mortgage and Encore Capital go up and down completely randomly.

Pair Corralation between AG Mortgage and Encore Capital

Given the investment horizon of 90 days AG Mortgage is expected to generate 9.82 times less return on investment than Encore Capital. But when comparing it to its historical volatility, AG Mortgage Investment is 8.07 times less risky than Encore Capital. It trades about 0.09 of its potential returns per unit of risk. Encore Capital Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,834  in Encore Capital Group on July 27, 2025 and sell it today you would earn a total of  645.00  from holding Encore Capital Group or generate 16.82% return on investment over 90 days.

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

AG Mortgage Investment  vs.  Encore Capital Group

AG Mortgage Investment

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AG Mortgage is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Encore Capital Group

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Encore Capital Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Encore Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AG Mortgage and Encore Capital

The main advantage of trading using opposite AG Mortgage and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AG Mortgage 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 AG Mortgage Investment 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 Transaction History module to view history of all your transactions and understand their impact on performance.