Correlation Between EJF Investments and Freddie Mac

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

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

Diversification Opportunities for EJF Investments and Freddie Mac

0.38

Correlation Coefficient

EJF Investments  Freddie Mac

Weak diversification

The 3 months correlation between EJF and Freddie is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding EJF Investments and Freddie Mac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freddie Mac and EJF Investments 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 EJF Investments are associated (or correlated) with Freddie Mac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freddie Mac has no effect on the direction of EJF Investments i.e., EJF Investments and Freddie Mac go up and down completely randomly.

Pair Corralation between EJF Investments and Freddie Mac

Assuming the 90 days trading horizon EJF Investments is expected to generate 20.64 times less return on investment than Freddie Mac. But when comparing it to its historical volatility, EJF Investments is 11.32 times less risky than Freddie Mac. It trades about 0.15 of its potential returns per unit of risk. Freddie Mac is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Freddie Mac on October 8, 2024 and sell it today you would earn a total of  300.00  from holding Freddie Mac or generate 277.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

EJF Investments  vs.  Freddie Mac

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.

Freddie Mac

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Freddie Mac are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Freddie Mac unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EJF Investments and Freddie Mac

The main advantage of trading using opposite EJF Investments and Freddie Mac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EJF Investments position performs unexpectedly, Freddie Mac 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 Freddie Mac will offset losses from the drop in Freddie Mac's long position.

The idea behind EJF Investments and Freddie Mac 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.