Correlation Between Baker Steel and EJF Investments
Can any of the company-specific risk be diversified away by investing in both Baker Steel and EJF Investments 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 Baker Steel and EJF Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baker Steel Resources and EJF Investments, you can compare the effects of market volatilities on Baker Steel and EJF Investments 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 Baker Steel with a short position of EJF Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Steel and EJF Investments.
Diversification Opportunities for Baker Steel and EJF Investments
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Baker and EJF is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and EJF Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EJF Investments and Baker Steel 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 Baker Steel Resources are associated (or correlated) with EJF Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EJF Investments has no effect on the direction of Baker Steel i.e., Baker Steel and EJF Investments go up and down completely randomly.
Pair Corralation between Baker Steel and EJF Investments
Assuming the 90 days trading horizon Baker Steel is expected to generate 3.44 times less return on investment than EJF Investments. In addition to that, Baker Steel is 1.2 times more volatile than EJF Investments. It trades about 0.04 of its total potential returns per unit of risk. EJF Investments is currently generating about 0.17 per unit of volatility. If you would invest 9,330 in EJF Investments on October 26, 2024 and sell it today you would earn a total of 3,320 from holding EJF Investments or generate 35.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baker Steel Resources vs. EJF Investments
Performance |
| Timeline |
| Baker Steel Resources |
| EJF Investments |
Baker Steel and EJF Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Steel and EJF Investments
The main advantage of trading using opposite Baker Steel and EJF Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Steel position performs unexpectedly, EJF Investments 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 EJF Investments will offset losses from the drop in EJF Investments' long position.| Baker Steel vs. SupplyMe Capital PLC | Baker Steel vs. Premier African Minerals | Baker Steel vs. SANTANDER UK 8 | Baker Steel vs. Tower Resources plc |
| EJF Investments vs. Coeur Mining | EJF Investments vs. Empire Metals Limited | EJF Investments vs. Metals Exploration Plc | EJF Investments vs. Jacquet Metal Service |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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