Correlation Between Ellington Residential and Ameriprise Financial

Can any of the company-specific risk be diversified away by investing in both Ellington Residential and Ameriprise 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 Ellington Residential and Ameriprise Financial 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 Ameriprise Financial, you can compare the effects of market volatilities on Ellington Residential and Ameriprise 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 Ellington Residential with a short position of Ameriprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Residential and Ameriprise Financial.

Diversification Opportunities for Ellington Residential and Ameriprise Financial

-0.37

Correlation Coefficient

Ellington Residential  Ameriprise Financial

Very good diversification

The 3 months correlation between Ellington and Ameriprise is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Ellington Residential i.e., Ellington Residential and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Ellington Residential and Ameriprise Financial

Given the investment horizon of 90 days Ellington Residential is expected to generate 109.14 times less return on investment than Ameriprise Financial. But when comparing it to its historical volatility, Ellington Residential Mortgage is 1.52 times less risky than Ameriprise Financial. It trades about 0.0 of its potential returns per unit of risk. Ameriprise Financial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  44,067  in Ameriprise Financial on September 3, 2024 and sell it today you would earn a total of  12,470  from holding Ameriprise Financial or generate 28.3% return on investment over 90 days.

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

Ellington Residential Mortgage  vs.  Ameriprise Financial

Ellington Residential

Risk-Adjusted Performance

0 of 100

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 latest stock price disarray, may contribute to short-term losses for the investors.

Ameriprise Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Ameriprise Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ellington Residential and Ameriprise Financial

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

The idea behind Ellington Residential Mortgage and Ameriprise 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 CEOs Directory module to screen CEOs from public companies around the world.