Correlation Between Ellington Financial and Arbor Realty
Can any of the company-specific risk be diversified away by investing in both Ellington Financial and Arbor Realty 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 Financial and Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ellington Financial and Arbor Realty Trust, you can compare the effects of market volatilities on Ellington Financial and Arbor Realty 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 Financial with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Financial and Arbor Realty.
Diversification Opportunities for Ellington Financial and Arbor Realty
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ellington and Arbor is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Financial and Arbor Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbor Realty Trust and Ellington Financial 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 Financial are associated (or correlated) with Arbor Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbor Realty Trust has no effect on the direction of Ellington Financial i.e., Ellington Financial and Arbor Realty go up and down completely randomly.
Pair Corralation between Ellington Financial and Arbor Realty
Considering the 90-day investment horizon Ellington Financial is expected to generate 0.52 times more return on investment than Arbor Realty. However, Ellington Financial is 1.93 times less risky than Arbor Realty. It trades about 0.31 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.02 per unit of risk. If you would invest 1,200 in Ellington Financial on October 21, 2024 and sell it today you would earn a total of 55.00 from holding Ellington Financial or generate 4.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ellington Financial vs. Arbor Realty Trust
Performance |
| Timeline |
| Ellington Financial |
| Arbor Realty Trust |
Ellington Financial and Arbor Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ellington Financial and Arbor Realty
The main advantage of trading using opposite Ellington Financial and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ellington Financial position performs unexpectedly, Arbor Realty 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 Arbor Realty will offset losses from the drop in Arbor Realty's long position.| Ellington Financial vs. Ellington Residential Mortgage | Ellington Financial vs. Orchid Island Capital | Ellington Financial vs. ARMOUR Residential REIT | Ellington Financial vs. Dynex Capital |
| Arbor Realty vs. Starwood Property Trust | Arbor Realty vs. Ready Capital Corp | Arbor Realty vs. Two Harbors Investments | Arbor Realty vs. AGNC Investment Corp |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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