Correlation Between Rithm Capital and Ellington Residential
Can any of the company-specific risk be diversified away by investing in both Rithm Capital and Ellington Residential 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 Rithm Capital and Ellington Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rithm Capital Corp and Ellington Residential Mortgage, you can compare the effects of market volatilities on Rithm Capital and Ellington Residential 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 Rithm Capital with a short position of Ellington Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rithm Capital and Ellington Residential.
Diversification Opportunities for Rithm Capital and Ellington Residential
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Rithm and Ellington is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Capital Corp and Ellington Residential Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Residential and Rithm Capital 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 Rithm Capital Corp are associated (or correlated) with Ellington Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellington Residential has no effect on the direction of Rithm Capital i.e., Rithm Capital and Ellington Residential go up and down completely randomly.
Pair Corralation between Rithm Capital and Ellington Residential
Given the investment horizon of 90 days Rithm Capital is expected to generate 1.04 times less return on investment than Ellington Residential. But when comparing it to its historical volatility, Rithm Capital Corp is 1.16 times less risky than Ellington Residential. It trades about 0.09 of its potential returns per unit of risk. Ellington Residential Mortgage is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 463.00 in Ellington Residential Mortgage on December 3, 2024 and sell it today you would earn a total of 180.00 from holding Ellington Residential Mortgage or generate 38.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Rithm Capital Corp vs. Ellington Residential Mortgage
Performance |
Timeline |
Rithm Capital Corp |
Ellington Residential |
Rithm Capital and Ellington Residential Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Rithm Capital and Ellington Residential
The main advantage of trading using opposite Rithm Capital and Ellington Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rithm Capital position performs unexpectedly, Ellington Residential 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 Residential will offset losses from the drop in Ellington Residential's long position.Rithm Capital vs. Starwood Property Trust | Rithm Capital vs. AGNC Investment Corp | Rithm Capital vs. Blackstone Mortgage Trust | Rithm Capital vs. Ares Commercial Real |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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