Correlation Between Ellington Residential and AlphaTime Acquisition

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

Diversification Opportunities for Ellington Residential and AlphaTime Acquisition

0.3

Correlation Coefficient

Ellington Residential  AlphaTime Acquisition

Weak diversification

The 3 months correlation between Ellington and AlphaTime is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and AlphaTime Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlphaTime Acquisition 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 AlphaTime Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlphaTime Acquisition has no effect on the direction of Ellington Residential i.e., Ellington Residential and AlphaTime Acquisition go up and down completely randomly.

Pair Corralation between Ellington Residential and AlphaTime Acquisition

Given the investment horizon of 90 days Ellington Residential is expected to generate 22.72 times less return on investment than AlphaTime Acquisition. But when comparing it to its historical volatility, Ellington Residential Mortgage is 20.38 times less risky than AlphaTime Acquisition. It trades about 0.16 of its potential returns per unit of risk. AlphaTime Acquisition Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  11.00  in AlphaTime Acquisition Corp on October 20, 2024 and sell it today you would earn a total of  3.00  from holding AlphaTime Acquisition Corp or generate 27.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	55.0%
Values	Daily Returns

Ellington Residential Mortgage  vs.  AlphaTime Acquisition Corp

Ellington Residential

Risk-Adjusted Performance

0 of 100

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.

AlphaTime Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AlphaTime Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively unsteady fundamental indicators, AlphaTime Acquisition may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ellington Residential and AlphaTime Acquisition

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

The idea behind Ellington Residential Mortgage and AlphaTime Acquisition Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.