Correlation Between EJF Investments and Tatton Asset

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

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

Diversification Opportunities for EJF Investments and Tatton Asset

0.1

Correlation Coefficient

EJF Investments  Tatton Asset

Average diversification

The 3 months correlation between EJF and Tatton is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding EJF Investments and Tatton Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tatton Asset Management 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 Tatton Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tatton Asset Management has no effect on the direction of EJF Investments i.e., EJF Investments and Tatton Asset go up and down completely randomly.

Pair Corralation between EJF Investments and Tatton Asset

Assuming the 90 days trading horizon EJF Investments is expected to generate 2.7 times less return on investment than Tatton Asset. But when comparing it to its historical volatility, EJF Investments is 1.15 times less risky than Tatton Asset. It trades about 0.03 of its potential returns per unit of risk. Tatton Asset Management is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  47,519  in Tatton Asset Management on October 8, 2024 and sell it today you would earn a total of  20,881  from holding Tatton Asset Management or generate 43.94% 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.  Tatton Asset Management

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

Tatton Asset Management

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tatton Asset Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Tatton Asset may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with EJF Investments and Tatton Asset

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

The idea behind EJF Investments and Tatton Asset Management 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.