Correlation Between Ellington Financial and AgJunction

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

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

Diversification Opportunities for Ellington Financial and AgJunction

0.25

Correlation Coefficient

Ellington Financial  AgJunction

Modest diversification

The 3 months correlation between Ellington and AgJunction is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Financial and AgJunction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AgJunction 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 AgJunction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AgJunction has no effect on the direction of Ellington Financial i.e., Ellington Financial and AgJunction go up and down completely randomly.

Pair Corralation between Ellington Financial and AgJunction

Considering the 90-day investment horizon Ellington Financial is expected to under-perform the AgJunction. But the stock apears to be less risky and, when comparing its historical volatility, Ellington Financial is 155.03 times less risky than AgJunction. The stock trades about -0.07 of its potential returns per unit of risk. The AgJunction is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  340.00  in AgJunction on September 12, 2024 and sell it today you would lose (40.00) from holding AgJunction or give up 11.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Ellington Financial  vs.  AgJunction

Ellington Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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 technical and 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.

AgJunction

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days AgJunction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady forward-looking indicators, AgJunction showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ellington Financial and AgJunction

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

The idea behind Ellington Financial and AgJunction 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.