Correlation Between Qudian and Ellington Financial
Can any of the company-specific risk be diversified away by investing in both Qudian 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 Qudian and Ellington Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Qudian Inc and Ellington Financial, you can compare the effects of market volatilities on Qudian 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 Qudian with a short position of Ellington Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qudian and Ellington Financial.
Diversification Opportunities for Qudian and Ellington Financial
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Qudian and Ellington is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Qudian Inc and Ellington Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Financial and Qudian 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 Qudian Inc 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 Qudian i.e., Qudian and Ellington Financial go up and down completely randomly.
Pair Corralation between Qudian and Ellington Financial
Allowing for the 90-day total investment horizon Qudian Inc is expected to generate 2.48 times more return on investment than Ellington Financial. However, Qudian is 2.48 times more volatile than Ellington Financial. It trades about 0.07 of its potential returns per unit of risk. Ellington Financial is currently generating about 0.04 per unit of risk. If you would invest 90.00 in Qudian Inc on August 26, 2024 and sell it today you would earn a total of 144.00 from holding Qudian Inc or generate 160.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Qudian Inc vs. Ellington Financial
Performance |
| Timeline |
| Qudian Inc |
| Ellington Financial |
Qudian and Ellington Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Qudian and Ellington Financial
The main advantage of trading using opposite Qudian and Ellington Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qudian 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.The idea behind Qudian Inc and Ellington Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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