Correlation Between ProAssurance and Encore Capital

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

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

Diversification Opportunities for ProAssurance and Encore Capital

0.14

Correlation Coefficient

ProAssurance  Encore Capital

Average diversification

The 3 months correlation between ProAssurance and Encore is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding ProAssurance 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 ProAssurance 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 ProAssurance 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 ProAssurance i.e., ProAssurance and Encore Capital go up and down completely randomly.

Pair Corralation between ProAssurance and Encore Capital

Considering the 90-day investment horizon ProAssurance is expected to generate 13.27 times less return on investment than Encore Capital. But when comparing it to its historical volatility, ProAssurance is 10.53 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

ProAssurance  vs.  Encore Capital Group

ProAssurance

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in ProAssurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ProAssurance is not utilizing all of its potentials. The newest stock price disturbance, 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 ProAssurance and Encore Capital

The main advantage of trading using opposite ProAssurance and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProAssurance 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 ProAssurance 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.