Correlation Between Ellington Residential and Sachem Capital
Can any of the company-specific risk be diversified away by investing in both Ellington Residential and Sachem 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 Sachem 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 Sachem Capital Corp, you can compare the effects of market volatilities on Ellington Residential and Sachem 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 Sachem Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Residential and Sachem Capital.
Diversification Opportunities for Ellington Residential and Sachem Capital
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ellington and Sachem is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem 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 Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of Ellington Residential i.e., Ellington Residential and Sachem Capital go up and down completely randomly.
Pair Corralation between Ellington Residential and Sachem Capital
Given the investment horizon of 90 days Ellington Residential Mortgage is expected to generate 0.28 times more return on investment than Sachem Capital. However, Ellington Residential Mortgage is 3.52 times less risky than Sachem Capital. It trades about 0.07 of its potential returns per unit of risk. Sachem Capital Corp is currently generating about -0.22 per unit of risk. If you would invest 629.00 in Ellington Residential Mortgage on November 1, 2024 and sell it today you would earn a total of 35.00 from holding Ellington Residential Mortgage or generate 5.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ellington Residential Mortgage vs. Sachem Capital Corp
Performance |
| Timeline |
| Ellington Residential |
| Sachem Capital Corp |
Ellington Residential and Sachem Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ellington Residential and Sachem Capital
The main advantage of trading using opposite Ellington Residential and Sachem Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ellington Residential position performs unexpectedly, Sachem 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 Sachem Capital will offset losses from the drop in Sachem 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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