Correlation Between United Parcel and EJF Investments

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

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

Diversification Opportunities for United Parcel and EJF Investments

0.22

Correlation Coefficient

United Parcel  EJF Investments

Modest diversification

The 3 months correlation between United and EJF is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and EJF Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EJF Investments and United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and EJF Investments go up and down completely randomly.

Pair Corralation between United Parcel and EJF Investments

Assuming the 90 days trading horizon United Parcel Service is expected to under-perform the EJF Investments. In addition to that, United Parcel is 1.18 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 0.05 per unit of volatility. If you would invest  11,733  in EJF Investments on December 23, 2024 and sell it today you would earn a total of  617.00  from holding EJF Investments or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

United Parcel Service  vs.  EJF Investments

United Parcel Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, United Parcel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

EJF Investments

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EJF Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EJF Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Parcel and EJF Investments

The main advantage of trading using opposite United Parcel and EJF Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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 United Parcel Service 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.