Correlation Between EJF Investments and MG Plc

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

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

Diversification Opportunities for EJF Investments and MG Plc

0.06

Correlation Coefficient

EJF Investments  MG Plc

Significant diversification

The 3 months correlation between EJF and MNG is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding EJF Investments and MG Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MG Plc 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 MG Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MG Plc has no effect on the direction of EJF Investments i.e., EJF Investments and MG Plc go up and down completely randomly.

Pair Corralation between EJF Investments and MG Plc

Assuming the 90 days trading horizon EJF Investments is expected to generate 1.91 times less return on investment than MG Plc. In addition to that, EJF Investments is 1.78 times more volatile than MG Plc. It trades about 0.06 of its total potential returns per unit of risk. MG Plc is currently generating about 0.2 per unit of volatility. If you would invest  19,375  in MG Plc on December 19, 2024 and sell it today you would earn a total of  2,745  from holding MG Plc or generate 14.17% return on investment over 90 days.

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

EJF Investments  vs.  MG Plc

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 unsteady basic indicators, EJF Investments may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MG Plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MG Plc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, MG Plc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EJF Investments and MG Plc

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

The idea behind EJF Investments and MG Plc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.