Correlation Between Ellington Residential and Interactive Brokers

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

Diversification Opportunities for Ellington Residential and Interactive Brokers

0.11

Correlation Coefficient

Ellington Residential  Interactive Brokers

Average diversification

The 3 months correlation between Ellington and Interactive is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and Interactive Brokers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interactive Brokers 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 Interactive Brokers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interactive Brokers has no effect on the direction of Ellington Residential i.e., Ellington Residential and Interactive Brokers go up and down completely randomly.

Pair Corralation between Ellington Residential and Interactive Brokers

Given the investment horizon of 90 days Ellington Residential is expected to generate 8.36 times less return on investment than Interactive Brokers. But when comparing it to its historical volatility, Ellington Residential Mortgage is 2.53 times less risky than Interactive Brokers. It trades about 0.02 of its potential returns per unit of risk. Interactive Brokers Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  18,545  in Interactive Brokers Group on December 1, 2024 and sell it today you would earn a total of  1,895  from holding Interactive Brokers Group or generate 10.22% return on investment over 90 days.

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

Ellington Residential Mortgage  vs.  Interactive Brokers Group

Ellington Residential

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ellington Residential Mortgage are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Interactive Brokers

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Interactive Brokers Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain forward-looking signals, Interactive Brokers may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ellington Residential and Interactive Brokers

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

The idea behind Ellington Residential Mortgage and Interactive Brokers Group 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.