Correlation Between Ares Commercial and Ellington Financial
Can any of the company-specific risk be diversified away by investing in both Ares Commercial and Ellington Financial 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 Ares Commercial and Ellington Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Commercial Real and Ellington Financial, you can compare the effects of market volatilities on Ares Commercial and Ellington Financial 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 Ares Commercial with a short position of Ellington Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Commercial and Ellington Financial.
Diversification Opportunities for Ares Commercial and Ellington Financial
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ares and Ellington is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ares Commercial Real and Ellington Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Financial and Ares Commercial 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 Ares Commercial Real are associated (or correlated) with Ellington Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellington Financial has no effect on the direction of Ares Commercial i.e., Ares Commercial and Ellington Financial go up and down completely randomly.
Pair Corralation between Ares Commercial and Ellington Financial
Given the investment horizon of 90 days Ares Commercial Real is expected to generate 2.03 times more return on investment than Ellington Financial. However, Ares Commercial is 2.03 times more volatile than Ellington Financial. It trades about 0.07 of its potential returns per unit of risk. Ellington Financial is currently generating about 0.07 per unit of risk. If you would invest 607.00 in Ares Commercial Real on August 24, 2024 and sell it today you would earn a total of 109.00 from holding Ares Commercial Real or generate 17.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Ares Commercial Real vs. Ellington Financial
Performance |
| Timeline |
| Ares Commercial Real |
| Ellington Financial |
Ares Commercial and Ellington Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Commercial and Ellington Financial
The main advantage of trading using opposite Ares Commercial and Ellington Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Commercial position performs unexpectedly, Ellington Financial 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 Ellington Financial will offset losses from the drop in Ellington Financial's long position.| Ares Commercial vs. Two Harbors Investments | Ares Commercial vs. Apollo Commercial Real | Ares Commercial vs. Ellington Financial | Ares Commercial vs. Dynex Capital |
| Ellington Financial vs. Ellington Residential Mortgage | Ellington Financial vs. Orchid Island Capital | Ellington Financial vs. ARMOUR Residential REIT | Ellington Financial vs. Dynex Capital |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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