Correlation Between Ellington Residential and Gold Resource
Can any of the company-specific risk be diversified away by investing in both Ellington Residential and Gold Resource 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 Gold Resource 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 Gold Resource, you can compare the effects of market volatilities on Ellington Residential and Gold Resource 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 Gold Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Residential and Gold Resource.
Diversification Opportunities for Ellington Residential and Gold Resource
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ellington and Gold is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and Gold Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Resource 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 Gold Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Resource has no effect on the direction of Ellington Residential i.e., Ellington Residential and Gold Resource go up and down completely randomly.
Pair Corralation between Ellington Residential and Gold Resource
Given the investment horizon of 90 days Ellington Residential is expected to generate 84.96 times less return on investment than Gold Resource. But when comparing it to its historical volatility, Ellington Residential Mortgage is 8.75 times less risky than Gold Resource. It trades about 0.01 of its potential returns per unit of risk. Gold Resource is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 35.00 in Gold Resource on November 2, 2024 and sell it today you would earn a total of 3.00 from holding Gold Resource or generate 8.57% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ellington Residential Mortgage vs. Gold Resource
Performance |
Timeline |
Ellington Residential |
Gold Resource |
Ellington Residential and Gold Resource Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ellington Residential and Gold Resource
The main advantage of trading using opposite Ellington Residential and Gold Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ellington Residential position performs unexpectedly, Gold Resource 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 Gold Resource will offset losses from the drop in Gold Resource's 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 |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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