Correlation Between Ametek and EJF Investments

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

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

Diversification Opportunities for Ametek and EJF Investments

0.16

Correlation Coefficient

Ametek  EJF Investments

Average diversification

The 3 months correlation between Ametek and EJF is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ametek Inc and EJF Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EJF Investments and Ametek 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 Ametek Inc 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 Ametek i.e., Ametek and EJF Investments go up and down completely randomly.

Pair Corralation between Ametek and EJF Investments

Assuming the 90 days trading horizon Ametek Inc is expected to under-perform the EJF Investments. But the stock apears to be less risky and, when comparing its historical volatility, Ametek Inc is 1.32 times less risky than EJF Investments. The stock trades about -0.4 of its potential returns per unit of risk. The EJF Investments is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11,700  in EJF Investments on October 8, 2024 and sell it today you would earn a total of  200.00  from holding EJF Investments or generate 1.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Ametek Inc  vs.  EJF Investments

Ametek Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ametek Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ametek may actually be approaching a critical reversion point that can send shares even higher in February 2025.

EJF Investments

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EJF Investments are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, EJF Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ametek and EJF Investments

The main advantage of trading using opposite Ametek and EJF Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ametek 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 Ametek Inc 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.