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

-0.15

Correlation Coefficient

Baker Steel  EJF Investments

Good diversification

The 3 months correlation between Baker and EJF is -0.15. 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 Resources is expected to under-perform the EJF Investments. In addition to that, Baker Steel is 1.02 times more volatile than EJF Investments. It trades about -0.07 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 21, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Baker Steel Resources  vs.  EJF Investments

Baker Steel Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baker Steel Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm 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 uncertain basic indicators, EJF Investments may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

The idea behind Baker Steel Resources 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.