Correlation Between Acres Commercial and Ellington Residential

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

By analyzing existing cross correlation between Acres Commercial Realty and Ellington Residential Mortgage, you can compare the effects of market volatilities on Acres Commercial and Ellington Residential 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 Acres Commercial with a short position of Ellington Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acres Commercial and Ellington Residential.

Diversification Opportunities for Acres Commercial and Ellington Residential

0.1

Correlation Coefficient

Acres Commercial  Ellington Residential

Average diversification

The 3 months correlation between Acres and Ellington is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Acres Commercial Realty and Ellington Residential Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Residential and Acres Commercial 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 Acres Commercial Realty are associated (or correlated) with Ellington Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellington Residential has no effect on the direction of Acres Commercial i.e., Acres Commercial and Ellington Residential go up and down completely randomly.

Pair Corralation between Acres Commercial and Ellington Residential

Considering the 90-day investment horizon Acres Commercial Realty is expected to generate 1.21 times more return on investment than Ellington Residential. However, Acres Commercial is 1.21 times more volatile than Ellington Residential Mortgage. It trades about 0.13 of its potential returns per unit of risk. Ellington Residential Mortgage is currently generating about 0.06 per unit of risk. If you would invest  1,545  in Acres Commercial Realty on September 12, 2024 and sell it today you would earn a total of  179.00  from holding Acres Commercial Realty or generate 11.59% return on investment over 90 days.

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

Acres Commercial Realty  vs.  Ellington Residential Mortgage

Acres Commercial Realty

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Acres Commercial Realty are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Acres Commercial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ellington Residential

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ellington Residential Mortgage are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Ellington Residential is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Acres Commercial and Ellington Residential

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

The idea behind Acres Commercial Realty and Ellington Residential Mortgage 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.