Correlation Between Granite Point and Ellington Financial
Can any of the company-specific risk be diversified away by investing in both Granite Point and Ellington Financial 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 Granite Point and Ellington Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Point Mortgage and Ellington Financial, you can compare the effects of market volatilities on Granite Point and Ellington Financial 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 Granite Point with a short position of Ellington Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Point and Ellington Financial.
Diversification Opportunities for Granite Point and Ellington Financial
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Granite and Ellington is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Granite Point Mortgage and Ellington Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Financial and Granite Point 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 Granite Point Mortgage are associated (or correlated) with Ellington Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellington Financial has no effect on the direction of Granite Point i.e., Granite Point and Ellington Financial go up and down completely randomly.
Pair Corralation between Granite Point and Ellington Financial
Assuming the 90 days trading horizon Granite Point Mortgage is expected to generate 13.22 times more return on investment than Ellington Financial. However, Granite Point is 13.22 times more volatile than Ellington Financial. It trades about 0.13 of its potential returns per unit of risk. Ellington Financial is currently generating about 0.32 per unit of risk. If you would invest 1,725 in Granite Point Mortgage on September 12, 2024 and sell it today you would earn a total of 59.00 from holding Granite Point Mortgage or generate 3.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Point Mortgage vs. Ellington Financial
Performance |
| Timeline |
| Granite Point Mortgage |
| Ellington Financial |
Granite Point and Ellington Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Point and Ellington Financial
The main advantage of trading using opposite Granite Point and Ellington Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Point position performs unexpectedly, Ellington Financial 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 Financial will offset losses from the drop in Ellington Financial's long position.| Granite Point vs. PennyMac Mortgage Investment | Granite Point vs. Rithm Capital Corp | Granite Point vs. ARMOUR Residential REIT | Granite Point vs. MFA Financial |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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