Correlation Between ELLINGTON FINL and TIMBERCREEK FINL

Can any of the company-specific risk be diversified away by investing in both ELLINGTON FINL and TIMBERCREEK FINL 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 FINL and TIMBERCREEK FINL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ELLINGTON FINL INC and TIMBERCREEK FINL, you can compare the effects of market volatilities on ELLINGTON FINL and TIMBERCREEK FINL 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 FINL with a short position of TIMBERCREEK FINL. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELLINGTON FINL and TIMBERCREEK FINL.

Diversification Opportunities for ELLINGTON FINL and TIMBERCREEK FINL

-0.15

Correlation Coefficient

ELLINGTON FINL  TIMBERCREEK FINL

Good diversification

The 3 months correlation between ELLINGTON and TIMBERCREEK is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding ELLINGTON FINL INC and TIMBERCREEK FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIMBERCREEK FINL and ELLINGTON FINL 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 FINL INC are associated (or correlated) with TIMBERCREEK FINL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIMBERCREEK FINL has no effect on the direction of ELLINGTON FINL i.e., ELLINGTON FINL and TIMBERCREEK FINL go up and down completely randomly.

Pair Corralation between ELLINGTON FINL and TIMBERCREEK FINL

Assuming the 90 days horizon ELLINGTON FINL INC is expected to generate 0.41 times more return on investment than TIMBERCREEK FINL. However, ELLINGTON FINL INC is 2.43 times less risky than TIMBERCREEK FINL. It trades about 0.06 of its potential returns per unit of risk. TIMBERCREEK FINL is currently generating about -0.06 per unit of risk. If you would invest  1,121  in ELLINGTON FINL INC on September 23, 2024 and sell it today you would earn a total of  39.00  from holding ELLINGTON FINL INC or generate 3.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ELLINGTON FINL INC  vs.  TIMBERCREEK FINL

ELLINGTON FINL INC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ELLINGTON FINL INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ELLINGTON FINL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TIMBERCREEK FINL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TIMBERCREEK FINL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ELLINGTON FINL and TIMBERCREEK FINL

The main advantage of trading using opposite ELLINGTON FINL and TIMBERCREEK FINL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELLINGTON FINL position performs unexpectedly, TIMBERCREEK FINL 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 TIMBERCREEK FINL will offset losses from the drop in TIMBERCREEK FINL's long position.

The idea behind ELLINGTON FINL INC and TIMBERCREEK FINL 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.