Correlation Between Ellington Residential and AJX Old

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

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

Diversification Opportunities for Ellington Residential and AJX Old

0.0

Correlation Coefficient

Ellington Residential  AJX Old

Pay attention - limited upside

The 3 months correlation between Ellington and AJX is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and AJX Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJX Old and Ellington Residential 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 Residential Mortgage are associated (or correlated) with AJX Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJX Old has no effect on the direction of Ellington Residential i.e., Ellington Residential and AJX Old go up and down completely randomly.

Pair Corralation between Ellington Residential and AJX Old

If you would invest (100.00) in AJX Old on December 29, 2024 and sell it today you would earn a total of  100.00  from holding AJX Old or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Ellington Residential Mortgage  vs.  AJX Old

Ellington Residential

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ellington Residential Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

AJX Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days AJX Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, AJX Old is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ellington Residential and AJX Old

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

The idea behind Ellington Residential Mortgage and AJX Old 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.