Correlation Between EJF Investments and Applied Materials

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

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

Diversification Opportunities for EJF Investments and Applied Materials

-0.02

Correlation Coefficient

EJF Investments  Applied Materials

Good diversification

The 3 months correlation between EJF and Applied is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding EJF Investments and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of EJF Investments i.e., EJF Investments and Applied Materials go up and down completely randomly.

Pair Corralation between EJF Investments and Applied Materials

Assuming the 90 days trading horizon EJF Investments is expected to generate 0.4 times more return on investment than Applied Materials. However, EJF Investments is 2.51 times less risky than Applied Materials. It trades about 0.3 of its potential returns per unit of risk. Applied Materials is currently generating about 0.09 per unit of risk. If you would invest  11,200  in EJF Investments on October 26, 2024 and sell it today you would earn a total of  1,450  from holding EJF Investments or generate 12.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

EJF Investments  vs.  Applied Materials

EJF Investments

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EJF Investments are ranked lower than 15 (%) 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 February 2025.

Applied Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Applied Materials 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 EJF Investments and Applied Materials

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

The idea behind EJF Investments and Applied Materials 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.