Correlation Between Ellington Financial and Ellington Residential
Can any of the company-specific risk be diversified away by investing in both Ellington Financial and Ellington Residential 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 Ellington Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ellington Financial and Ellington Residential Mortgage, you can compare the effects of market volatilities on Ellington Financial and Ellington Residential 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 Ellington Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Financial and Ellington Residential.
Diversification Opportunities for Ellington Financial and Ellington Residential
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ellington and Ellington is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Financial and Ellington Residential Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Residential 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 Ellington Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellington Residential has no effect on the direction of Ellington Financial i.e., Ellington Financial and Ellington Residential go up and down completely randomly.
Pair Corralation between Ellington Financial and Ellington Residential
Considering the 90-day investment horizon Ellington Financial is expected to generate 0.98 times more return on investment than Ellington Residential. However, Ellington Financial is 1.02 times less risky than Ellington Residential. It trades about 0.28 of its potential returns per unit of risk. Ellington Residential Mortgage is currently generating about -0.02 per unit of risk. If you would invest 1,242 in Ellington Financial on November 18, 2024 and sell it today you would earn a total of 57.00 from holding Ellington Financial or generate 4.59% 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. Ellington Residential Mortgage
Performance |
| Timeline |
| Ellington Financial |
| Ellington Residential |
Ellington Financial and Ellington Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ellington Financial and Ellington Residential
The main advantage of trading using opposite Ellington Financial and Ellington Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ellington Financial position performs unexpectedly, Ellington Residential 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 Ellington Residential will offset losses from the drop in Ellington Residential'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 |
| Ellington Residential vs. Dynex Capital | Ellington Residential vs. Orchid Island Capital | Ellington Residential vs. ARMOUR Residential REIT | Ellington Residential vs. Ready Capital 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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