Correlation Between Cherry Hill and Ellington Residential
Can any of the company-specific risk be diversified away by investing in both Cherry Hill and Ellington Residential 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 Cherry Hill and Ellington Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cherry Hill Mortgage and Ellington Residential Mortgage, you can compare the effects of market volatilities on Cherry Hill and Ellington Residential 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 Cherry Hill with a short position of Ellington Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cherry Hill and Ellington Residential.
Diversification Opportunities for Cherry Hill and Ellington Residential
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cherry and Ellington is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cherry Hill Mortgage and Ellington Residential Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Residential and Cherry Hill 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 Cherry Hill Mortgage are associated (or correlated) with Ellington Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellington Residential has no effect on the direction of Cherry Hill i.e., Cherry Hill and Ellington Residential go up and down completely randomly.
Pair Corralation between Cherry Hill and Ellington Residential
Assuming the 90 days trading horizon Cherry Hill Mortgage is expected to generate 0.48 times more return on investment than Ellington Residential. However, Cherry Hill Mortgage is 2.09 times less risky than Ellington Residential. It trades about 0.11 of its potential returns per unit of risk. Ellington Residential Mortgage is currently generating about 0.03 per unit of risk. If you would invest 1,812 in Cherry Hill Mortgage on August 31, 2024 and sell it today you would earn a total of 565.00 from holding Cherry Hill Mortgage or generate 31.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cherry Hill Mortgage vs. Ellington Residential Mortgage
Performance |
| Timeline |
| Cherry Hill Mortgage |
| Ellington Residential |
Cherry Hill and Ellington Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cherry Hill and Ellington Residential
The main advantage of trading using opposite Cherry Hill and Ellington Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cherry Hill position performs unexpectedly, Ellington Residential 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 Residential will offset losses from the drop in Ellington Residential's long position.| Cherry Hill vs. ACRES Commercial Realty | Cherry Hill vs. Chimera Investment | Cherry Hill vs. Cherry Hill Mortgage |
| Ellington Residential vs. Ellington Financial | Ellington Residential vs. Dynex Capital | Ellington Residential vs. Orchid Island Capital | Ellington Residential vs. Invesco Mortgage 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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