Correlation Between Ellington Financial and ACRES Commercial

Can any of the company-specific risk be diversified away by investing in both Ellington Financial and ACRES Commercial 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 Financial and ACRES Commercial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ellington Financial and ACRES Commercial Realty, you can compare the effects of market volatilities on Ellington Financial and ACRES Commercial 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 Financial with a short position of ACRES Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Financial and ACRES Commercial.

Diversification Opportunities for Ellington Financial and ACRES Commercial

0.05

Correlation Coefficient

Ellington Financial  ACRES Commercial

Significant diversification

The 3 months correlation between Ellington and ACRES is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Financial and ACRES Commercial Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACRES Commercial Realty and Ellington Financial 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 Financial are associated (or correlated) with ACRES Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACRES Commercial Realty has no effect on the direction of Ellington Financial i.e., Ellington Financial and ACRES Commercial go up and down completely randomly.

Pair Corralation between Ellington Financial and ACRES Commercial

Assuming the 90 days trading horizon Ellington Financial is expected to generate 7.32 times less return on investment than ACRES Commercial. But when comparing it to its historical volatility, Ellington Financial is 5.05 times less risky than ACRES Commercial. It trades about 0.17 of its potential returns per unit of risk. ACRES Commercial Realty is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,240  in ACRES Commercial Realty on September 27, 2024 and sell it today you would earn a total of  58.00  from holding ACRES Commercial Realty or generate 2.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

Ellington Financial  vs.  ACRES Commercial Realty

Ellington Financial

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Ellington Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Ellington Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ACRES Commercial Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACRES Commercial Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ACRES Commercial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ellington Financial and ACRES Commercial

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

The idea behind Ellington Financial and ACRES Commercial Realty 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.