Correlation Between Ellington Residential and Ladder Capital
Can any of the company-specific risk be diversified away by investing in both Ellington Residential and Ladder Capital 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 Ladder Capital 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 Ladder Capital Corp, you can compare the effects of market volatilities on Ellington Residential and Ladder Capital 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 Ladder Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Residential and Ladder Capital.
Diversification Opportunities for Ellington Residential and Ladder Capital
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ellington and Ladder is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and Ladder Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ladder Capital Corp 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 Ladder Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ladder Capital Corp has no effect on the direction of Ellington Residential i.e., Ellington Residential and Ladder Capital go up and down completely randomly.
Pair Corralation between Ellington Residential and Ladder Capital
Given the investment horizon of 90 days Ellington Residential is expected to generate 3.92 times less return on investment than Ladder Capital. In addition to that, Ellington Residential is 1.35 times more volatile than Ladder Capital Corp. It trades about 0.03 of its total potential returns per unit of risk. Ladder Capital Corp is currently generating about 0.16 per unit of volatility. If you would invest 1,129 in Ladder Capital Corp on August 27, 2024 and sell it today you would earn a total of 43.00 from holding Ladder Capital Corp or generate 3.81% 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. Ladder Capital Corp
Performance |
| Timeline |
| Ellington Residential |
| Ladder Capital Corp |
Ellington Residential and Ladder Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ellington Residential and Ladder Capital
The main advantage of trading using opposite Ellington Residential and Ladder Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ellington Residential position performs unexpectedly, Ladder Capital 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 Ladder Capital will offset losses from the drop in Ladder Capital'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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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