Correlation Between FAST RETAIL and ELLINGTON FINL

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

By analyzing existing cross correlation between FAST RETAIL ADR and ELLINGTON FINL INC, you can compare the effects of market volatilities on FAST RETAIL and ELLINGTON FINL 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 FAST RETAIL with a short position of ELLINGTON FINL. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and ELLINGTON FINL.

Diversification Opportunities for FAST RETAIL and ELLINGTON FINL

0.58

Correlation Coefficient

FAST RETAIL  ELLINGTON FINL

Very weak diversification

The 3 months correlation between FAST and ELLINGTON is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and ELLINGTON FINL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELLINGTON FINL INC and FAST RETAIL 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 FAST RETAIL ADR are associated (or correlated) with ELLINGTON FINL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELLINGTON FINL INC has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and ELLINGTON FINL go up and down completely randomly.

Pair Corralation between FAST RETAIL and ELLINGTON FINL

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to under-perform the ELLINGTON FINL. In addition to that, FAST RETAIL is 1.82 times more volatile than ELLINGTON FINL INC. It trades about -0.19 of its total potential returns per unit of risk. ELLINGTON FINL INC is currently generating about 0.12 per unit of volatility. If you would invest  1,157  in ELLINGTON FINL INC on October 12, 2024 and sell it today you would earn a total of  23.00  from holding ELLINGTON FINL INC or generate 1.99% return on investment over 90 days.

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

FAST RETAIL ADR  vs.  ELLINGTON FINL INC

FAST RETAIL ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FAST RETAIL ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FAST RETAIL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ELLINGTON FINL INC

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ELLINGTON FINL INC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ELLINGTON FINL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FAST RETAIL and ELLINGTON FINL

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

The idea behind FAST RETAIL ADR and ELLINGTON FINL INC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.