Correlation Between ELLINGTON RESIDMTG and GREAT AJAX

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

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

Diversification Opportunities for ELLINGTON RESIDMTG and GREAT AJAX

0.16

Correlation Coefficient

ELLINGTON RESIDMTG  GREAT AJAX

Average diversification

The 3 months correlation between ELLINGTON and GREAT is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ELLINGTON RESIDMTG SBI and GREAT AJAX P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREAT AJAX P and ELLINGTON RESIDMTG 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 RESIDMTG SBI are associated (or correlated) with GREAT AJAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREAT AJAX P has no effect on the direction of ELLINGTON RESIDMTG i.e., ELLINGTON RESIDMTG and GREAT AJAX go up and down completely randomly.

Pair Corralation between ELLINGTON RESIDMTG and GREAT AJAX

Assuming the 90 days horizon ELLINGTON RESIDMTG SBI is expected to under-perform the GREAT AJAX. But the stock apears to be less risky and, when comparing its historical volatility, ELLINGTON RESIDMTG SBI is 1.71 times less risky than GREAT AJAX. The stock trades about -0.13 of its potential returns per unit of risk. The GREAT AJAX P is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  261.00  in GREAT AJAX P on December 20, 2024 and sell it today you would earn a total of  13.00  from holding GREAT AJAX P or generate 4.98% return on investment over 90 days.

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

ELLINGTON RESIDMTG SBI  vs.  GREAT AJAX P

ELLINGTON RESIDMTG SBI

Risk-Adjusted Performance

Very Weak

Over the last 90 days ELLINGTON RESIDMTG SBI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

GREAT AJAX P

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GREAT AJAX P are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GREAT AJAX may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ELLINGTON RESIDMTG and GREAT AJAX

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

The idea behind ELLINGTON RESIDMTG SBI and GREAT AJAX P 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.