Correlation Between GOME Retail and ELLINGTON FINL

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

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

Diversification Opportunities for GOME Retail and ELLINGTON FINL

-0.7

Correlation Coefficient

GOME Retail  ELLINGTON FINL

Excellent diversification

The 3 months correlation between GOME and ELLINGTON is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding GOME Retail Holdings and ELLINGTON FINL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELLINGTON FINL INC and GOME Retail 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 GOME Retail Holdings are associated (or correlated) with ELLINGTON FINL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELLINGTON FINL INC has no effect on the direction of GOME Retail i.e., GOME Retail and ELLINGTON FINL go up and down completely randomly.

Pair Corralation between GOME Retail and ELLINGTON FINL

Assuming the 90 days trading horizon GOME Retail Holdings is expected to generate 12.77 times more return on investment than ELLINGTON FINL. However, GOME Retail is 12.77 times more volatile than ELLINGTON FINL INC. It trades about 0.05 of its potential returns per unit of risk. ELLINGTON FINL INC is currently generating about 0.06 per unit of risk. If you would invest  0.10  in GOME Retail Holdings on September 23, 2024 and sell it today you would earn a total of  0.00  from holding GOME Retail Holdings or generate 0.0% return on investment over 90 days.

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

GOME Retail Holdings  vs.  ELLINGTON FINL INC

GOME Retail Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GOME Retail Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GOME Retail unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with GOME Retail and ELLINGTON FINL

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

The idea behind GOME Retail Holdings and ELLINGTON FINL INC 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .