Correlation Between Invesco Mortgage and Ellington Financial
Can any of the company-specific risk be diversified away by investing in both Invesco Mortgage 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 Invesco Mortgage and Ellington Financial 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 Financial, you can compare the effects of market volatilities on Invesco Mortgage 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 Invesco Mortgage with a short position of Ellington Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Mortgage and Ellington Financial.
Diversification Opportunities for Invesco Mortgage and Ellington Financial
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Invesco and Ellington is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Mortgage Capital and Ellington Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Financial 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 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 Invesco Mortgage i.e., Invesco Mortgage and Ellington Financial go up and down completely randomly.
Pair Corralation between Invesco Mortgage and Ellington Financial
Considering the 90-day investment horizon Invesco Mortgage Capital is expected to generate 1.6 times more return on investment than Ellington Financial. However, Invesco Mortgage is 1.6 times more volatile than Ellington Financial. It trades about -0.02 of its potential returns per unit of risk. Ellington Financial is currently generating about -0.08 per unit of risk. If you would invest 831.00 in Invesco Mortgage Capital on August 23, 2024 and sell it today you would lose (20.00) from holding Invesco Mortgage Capital or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Mortgage Capital vs. Ellington Financial
Performance |
| Timeline |
| Invesco Mortgage Capital |
| Ellington Financial |
Invesco Mortgage and Ellington Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Mortgage and Ellington Financial
The main advantage of trading using opposite Invesco Mortgage and Ellington Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Mortgage 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.| Invesco Mortgage vs. MFA Financial | Invesco Mortgage vs. Two Harbors Investments | Invesco Mortgage vs. New York Mortgage | Invesco Mortgage vs. ARMOUR Residential REIT |
| Ellington Financial vs. Ellington Residential Mortgage | Ellington Financial vs. Orchid Island Capital | Ellington Financial vs. ARMOUR Residential REIT | Ellington Financial vs. Dynex 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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