Correlation Between Ellington Residential and Eaton Vance

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

Diversification Opportunities for Ellington Residential and Eaton Vance

0.81

Correlation Coefficient

Ellington Residential  Eaton Vance

Very poor diversification

The 3 months correlation between Ellington and Eaton is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and Eaton Vance Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Floating 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Floating has no effect on the direction of Ellington Residential i.e., Ellington Residential and Eaton Vance go up and down completely randomly.

Pair Corralation between Ellington Residential and Eaton Vance

Given the investment horizon of 90 days Ellington Residential Mortgage is expected to under-perform the Eaton Vance. In addition to that, Ellington Residential is 1.79 times more volatile than Eaton Vance Floating. It trades about -0.08 of its total potential returns per unit of risk. Eaton Vance Floating is currently generating about -0.08 per unit of volatility. If you would invest  1,295  in Eaton Vance Floating on December 29, 2024 and sell it today you would lose (42.00) from holding Eaton Vance Floating or give up 3.24% of portfolio value over 90 days.

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

Ellington Residential Mortgage  vs.  Eaton Vance Floating

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.

Eaton Vance Floating

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eaton Vance Floating has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Eaton Vance is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ellington Residential and Eaton Vance

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

The idea behind Ellington Residential Mortgage and Eaton Vance Floating 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.