Correlation Between Ellington Residential and Bynordic Acquisition

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

Diversification Opportunities for Ellington Residential and Bynordic Acquisition

0.61

Correlation Coefficient

Ellington Residential  Bynordic Acquisition

Poor diversification

The 3 months correlation between Ellington and Bynordic is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and Bynordic Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bynordic Acquisition Corp 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 Bynordic Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bynordic Acquisition Corp has no effect on the direction of Ellington Residential i.e., Ellington Residential and Bynordic Acquisition go up and down completely randomly.

Pair Corralation between Ellington Residential and Bynordic Acquisition

Given the investment horizon of 90 days Ellington Residential Mortgage is expected to under-perform the Bynordic Acquisition. In addition to that, Ellington Residential is 3.62 times more volatile than Bynordic Acquisition Corp. It trades about -0.11 of its total potential returns per unit of risk. Bynordic Acquisition Corp is currently generating about -0.2 per unit of volatility. If you would invest  1,142  in Bynordic Acquisition Corp on December 30, 2024 and sell it today you would lose (27.00) from holding Bynordic Acquisition Corp or give up 2.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	59.68%
Values	Daily Returns

Ellington Residential Mortgage  vs.  Bynordic Acquisition Corp

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Bynordic Acquisition Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bynordic Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Bynordic Acquisition is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ellington Residential and Bynordic Acquisition

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

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