Correlation Between Ellington Residential and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Ellington Residential and Dow Jones 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 Ellington Residential and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ellington Residential Mortgage and Dow Jones Industrial, you can compare the effects of market volatilities on Ellington Residential and Dow Jones 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 Ellington Residential with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Residential and Dow Jones.
Diversification Opportunities for Ellington Residential and Dow Jones
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ellington and Dow is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Ellington Residential 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 Ellington Residential Mortgage are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Ellington Residential i.e., Ellington Residential and Dow Jones go up and down completely randomly.
Pair Corralation between Ellington Residential and Dow Jones
Given the investment horizon of 90 days Ellington Residential Mortgage is expected to under-perform the Dow Jones. In addition to that, Ellington Residential is 1.58 times more volatile than Dow Jones Industrial. It trades about -0.11 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 per unit of volatility. If you would invest 4,251,495 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 135,540 from holding Dow Jones Industrial or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ellington Residential Mortgage vs. Dow Jones Industrial
Performance |
| Timeline |
Ellington Residential and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Ellington Residential Mortgage
Pair trading matchups for Ellington Residential
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Ellington Residential and Dow Jones
The main advantage of trading using opposite Ellington Residential and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ellington Residential position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Ellington Residential vs. Dynex Capital | Ellington Residential vs. Orchid Island Capital | Ellington Residential vs. ARMOUR Residential REIT | Ellington Residential vs. Ready Capital Corp |
| Dow Jones vs. Barrick Gold Corp | Dow Jones vs. Jutal Offshore Oil | Dow Jones vs. Eastern Co | Dow Jones vs. Weyco Group |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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