Correlation Between Ford and EJF Investments
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and EJF Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and EJF Investments, you can compare the effects of market volatilities on Ford 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 Ford with a short position of EJF Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and EJF Investments.
Diversification Opportunities for Ford and EJF Investments
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ford and EJF is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and EJF Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EJF Investments and Ford 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 Ford Motor 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 Ford i.e., Ford and EJF Investments go up and down completely randomly.
Pair Corralation between Ford and EJF Investments
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the EJF Investments. In addition to that, Ford is 1.15 times more volatile than EJF Investments. It trades about -0.25 of its total potential returns per unit of risk. EJF Investments is currently generating about 0.26 per unit of volatility. If you would invest 11,750 in EJF Investments on October 11, 2024 and sell it today you would earn a total of 800.00 from holding EJF Investments or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Ford Motor vs. EJF Investments
Performance |
| Timeline |
| Ford Motor |
| EJF Investments |
Ford and EJF Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and EJF Investments
The main advantage of trading using opposite Ford and EJF Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and EJF Investments 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.| EJF Investments vs. Fevertree Drinks Plc | EJF Investments vs. Ecclesiastical Insurance Office | EJF Investments vs. GreenX Metals | EJF Investments vs. Associated British Foods |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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