Correlation Between Ellington Financial and Sachem Capital

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

By analyzing existing cross correlation between Ellington Financial and Sachem Capital Corp, you can compare the effects of market volatilities on Ellington Financial and Sachem Capital 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 Sachem Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Financial and Sachem Capital.

Diversification Opportunities for Ellington Financial and Sachem Capital

-0.44

Correlation Coefficient

Ellington Financial  Sachem Capital

Very good diversification

The 3 months correlation between Ellington and Sachem is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Financial and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital Corp 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 Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of Ellington Financial i.e., Ellington Financial and Sachem Capital go up and down completely randomly.

Pair Corralation between Ellington Financial and Sachem Capital

Assuming the 90 days trading horizon Ellington Financial is expected to generate 0.61 times more return on investment than Sachem Capital. However, Ellington Financial is 1.64 times less risky than Sachem Capital. It trades about 0.05 of its potential returns per unit of risk. Sachem Capital Corp is currently generating about -0.01 per unit of risk. If you would invest  2,034  in Ellington Financial on October 15, 2024 and sell it today you would earn a total of  522.00  from holding Ellington Financial or generate 25.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.14%
Values	Daily Returns

Ellington Financial  vs.  Sachem Capital Corp

Ellington Financial

Risk-Adjusted Performance

0 of 100

OK

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Sachem Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sachem Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ellington Financial and Sachem Capital

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

The idea behind Ellington Financial and Sachem Capital 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.