Correlation Between Ellington Financial and Chimera Investment
Can any of the company-specific risk be diversified away by investing in both Ellington Financial and Chimera Investment 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 Chimera Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ellington Financial and Chimera Investment, you can compare the effects of market volatilities on Ellington Financial and Chimera Investment 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 Chimera Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Financial and Chimera Investment.
Diversification Opportunities for Ellington Financial and Chimera Investment
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ellington and Chimera is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Financial and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment 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 Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of Ellington Financial i.e., Ellington Financial and Chimera Investment go up and down completely randomly.
Pair Corralation between Ellington Financial and Chimera Investment
Considering the 90-day investment horizon Ellington Financial is expected to generate 0.57 times more return on investment than Chimera Investment. However, Ellington Financial is 1.77 times less risky than Chimera Investment. It trades about 0.03 of its potential returns per unit of risk. Chimera Investment is currently generating about 0.01 per unit of risk. If you would invest 1,162 in Ellington Financial on August 27, 2024 and sell it today you would earn a total of 90.00 from holding Ellington Financial or generate 7.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ellington Financial vs. Chimera Investment
Performance |
| Timeline |
| Ellington Financial |
| Chimera Investment |
Ellington Financial and Chimera Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ellington Financial and Chimera Investment
The main advantage of trading using opposite Ellington Financial and Chimera Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ellington Financial position performs unexpectedly, Chimera Investment 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 Chimera Investment will offset losses from the drop in Chimera Investment'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 |
| Chimera Investment vs. Two Harbors Investments | Chimera Investment vs. MFA Financial | Chimera Investment vs. Invesco Mortgage Capital | Chimera Investment vs. Orchid Island Capital |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |