Correlation Between AgJunction and Ellington Financial

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

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

Diversification Opportunities for AgJunction and Ellington Financial

0.17

Correlation Coefficient

AgJunction  Ellington Financial

Average diversification

The 3 months correlation between AgJunction and Ellington is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding AgJunction and Ellington Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Financial and AgJunction 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 AgJunction 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 AgJunction i.e., AgJunction and Ellington Financial go up and down completely randomly.

Pair Corralation between AgJunction and Ellington Financial

Considering the 90-day investment horizon AgJunction is expected to generate 158.09 times more return on investment than Ellington Financial. However, AgJunction is 158.09 times more volatile than Ellington Financial. It trades about 0.12 of its potential returns per unit of risk. Ellington Financial is currently generating about -0.08 per unit of risk. If you would invest  351.00  in AgJunction on September 13, 2024 and sell it today you would lose (51.00) from holding AgJunction or give up 14.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

AgJunction  vs.  Ellington Financial

AgJunction

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days AgJunction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady forward-looking indicators, AgJunction showed solid returns over the last few months and may actually be approaching a breakup point.

Ellington Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ellington Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Ellington Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AgJunction and Ellington Financial

The main advantage of trading using opposite AgJunction and Ellington Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AgJunction 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 AgJunction 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.