Correlation Between EJF Investments and Falcon Oil

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

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

Diversification Opportunities for EJF Investments and Falcon Oil

0.68

Correlation Coefficient

EJF Investments  Falcon Oil

Poor diversification

The 3 months correlation between EJF and Falcon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding EJF Investments and Falcon Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Oil Gas 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 Falcon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Oil Gas has no effect on the direction of EJF Investments i.e., EJF Investments and Falcon Oil go up and down completely randomly.

Pair Corralation between EJF Investments and Falcon Oil

Assuming the 90 days trading horizon EJF Investments is expected to generate 2.36 times less return on investment than Falcon Oil. But when comparing it to its historical volatility, EJF Investments is 2.35 times less risky than Falcon Oil. It trades about 0.01 of its potential returns per unit of risk. Falcon Oil Gas is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  925.00  in Falcon Oil Gas on October 24, 2024 and sell it today you would lose (145.00) from holding Falcon Oil Gas or give up 15.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

EJF Investments  vs.  Falcon Oil Gas

EJF Investments

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EJF Investments are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, EJF Investments unveiled solid returns over the last few months and may actually be approaching a breakup point.

Falcon Oil Gas

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Oil Gas are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Falcon Oil exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EJF Investments and Falcon Oil

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

The idea behind EJF Investments and Falcon Oil Gas 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.