Correlation Between Ellington Financial and Franklin BSP
Can any of the company-specific risk be diversified away by investing in both Ellington Financial and Franklin BSP 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 Franklin BSP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ellington Financial and Franklin BSP Realty, you can compare the effects of market volatilities on Ellington Financial and Franklin BSP 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 Franklin BSP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Financial and Franklin BSP.
Diversification Opportunities for Ellington Financial and Franklin BSP
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ellington and Franklin is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Financial and Franklin BSP Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin BSP Realty 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 Franklin BSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin BSP Realty has no effect on the direction of Ellington Financial i.e., Ellington Financial and Franklin BSP go up and down completely randomly.
Pair Corralation between Ellington Financial and Franklin BSP
Considering the 90-day investment horizon Ellington Financial is expected to generate 0.67 times more return on investment than Franklin BSP. However, Ellington Financial is 1.5 times less risky than Franklin BSP. It trades about 0.15 of its potential returns per unit of risk. Franklin BSP Realty is currently generating about 0.04 per unit of risk. If you would invest 1,194 in Ellington Financial on November 4, 2024 and sell it today you would earn a total of 62.00 from holding Ellington Financial or generate 5.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ellington Financial vs. Franklin BSP Realty
Performance |
| Timeline |
| Ellington Financial |
| Franklin BSP Realty |
Ellington Financial and Franklin BSP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ellington Financial and Franklin BSP
The main advantage of trading using opposite Ellington Financial and Franklin BSP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ellington Financial position performs unexpectedly, Franklin BSP 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 Franklin BSP will offset losses from the drop in Franklin BSP'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 |
| Franklin BSP vs. AGNC Investment Corp | Franklin BSP vs. Nexpoint Real Estate | Franklin BSP vs. Ladder Capital Corp | Franklin BSP vs. Apollo Commercial Real |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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