Correlation Between Invesco Mortgage and Ellington Residential
Can any of the company-specific risk be diversified away by investing in both Invesco Mortgage 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 Invesco Mortgage and Ellington Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Mortgage Capital and Ellington Residential Mortgage, you can compare the effects of market volatilities on Invesco Mortgage 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 Invesco Mortgage with a short position of Ellington Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Mortgage and Ellington Residential.
Diversification Opportunities for Invesco Mortgage and Ellington Residential
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and Ellington is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Mortgage Capital and Ellington Residential Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Residential and Invesco Mortgage 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 Invesco Mortgage Capital 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 Invesco Mortgage i.e., Invesco Mortgage and Ellington Residential go up and down completely randomly.
Pair Corralation between Invesco Mortgage and Ellington Residential
Considering the 90-day investment horizon Invesco Mortgage Capital is expected to under-perform the Ellington Residential. In addition to that, Invesco Mortgage is 1.35 times more volatile than Ellington Residential Mortgage. It trades about -0.01 of its total potential returns per unit of risk. Ellington Residential Mortgage is currently generating about 0.03 per unit of volatility. If you would invest 563.00 in Ellington Residential Mortgage on August 23, 2024 and sell it today you would earn a total of 102.00 from holding Ellington Residential Mortgage or generate 18.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Mortgage Capital vs. Ellington Residential Mortgage
Performance |
| Timeline |
| Invesco Mortgage Capital |
| Ellington Residential |
Invesco Mortgage and Ellington Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Mortgage and Ellington Residential
The main advantage of trading using opposite Invesco Mortgage and Ellington Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Mortgage 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.| Invesco Mortgage vs. MFA Financial | Invesco Mortgage vs. Two Harbors Investments | Invesco Mortgage vs. New York Mortgage | Invesco Mortgage vs. ARMOUR Residential REIT |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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