Correlation Between ELLINGTON RESIDMTG and SERI INDUSTRIAL

Can any of the company-specific risk be diversified away by investing in both ELLINGTON RESIDMTG and SERI INDUSTRIAL 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 SERI INDUSTRIAL 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 SERI INDUSTRIAL EO, you can compare the effects of market volatilities on ELLINGTON RESIDMTG and SERI INDUSTRIAL 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 SERI INDUSTRIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELLINGTON RESIDMTG and SERI INDUSTRIAL.

Diversification Opportunities for ELLINGTON RESIDMTG and SERI INDUSTRIAL

-0.29

Correlation Coefficient

ELLINGTON RESIDMTG  SERI INDUSTRIAL

Very good diversification

The 3 months correlation between ELLINGTON and SERI is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding ELLINGTON RESIDMTG SBI and SERI INDUSTRIAL EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SERI INDUSTRIAL EO 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 SERI INDUSTRIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SERI INDUSTRIAL EO has no effect on the direction of ELLINGTON RESIDMTG i.e., ELLINGTON RESIDMTG and SERI INDUSTRIAL go up and down completely randomly.

Pair Corralation between ELLINGTON RESIDMTG and SERI INDUSTRIAL

Assuming the 90 days horizon ELLINGTON RESIDMTG SBI is expected to generate 0.58 times more return on investment than SERI INDUSTRIAL. However, ELLINGTON RESIDMTG SBI is 1.74 times less risky than SERI INDUSTRIAL. It trades about 0.02 of its potential returns per unit of risk. SERI INDUSTRIAL EO is currently generating about -0.14 per unit of risk. If you would invest  637.00  in ELLINGTON RESIDMTG SBI on October 10, 2024 and sell it today you would earn a total of  3.00  from holding ELLINGTON RESIDMTG SBI or generate 0.47% return on investment over 90 days.

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

ELLINGTON RESIDMTG SBI  vs.  SERI INDUSTRIAL EO

ELLINGTON RESIDMTG SBI

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ELLINGTON RESIDMTG SBI are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ELLINGTON RESIDMTG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SERI INDUSTRIAL EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SERI INDUSTRIAL EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical 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 RESIDMTG and SERI INDUSTRIAL

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

The idea behind ELLINGTON RESIDMTG SBI and SERI INDUSTRIAL EO 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.