Correlation Between Stifel Financial and Ellington Residential

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

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

Diversification Opportunities for Stifel Financial and Ellington Residential

-0.28

Correlation Coefficient

Stifel Financial  Ellington Residential

Very good diversification

The 3 months correlation between Stifel and Ellington is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Stifel Financial and Ellington Residential Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Residential and Stifel 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 Stifel Financial 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 Stifel Financial i.e., Stifel Financial and Ellington Residential go up and down completely randomly.

Pair Corralation between Stifel Financial and Ellington Residential

Allowing for the 90-day total investment horizon Stifel Financial is expected to under-perform the Ellington Residential. But the stock apears to be less risky and, when comparing its historical volatility, Stifel Financial is 1.38 times less risky than Ellington Residential. The stock trades about -0.29 of its potential returns per unit of risk. The Ellington Residential Mortgage is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  654.00  in Ellington Residential Mortgage on September 12, 2024 and sell it today you would earn a total of  40.00  from holding Ellington Residential Mortgage or generate 6.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Stifel Financial  vs.  Ellington Residential Mortgage

Stifel Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stifel Financial are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Stifel Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Ellington Residential

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ellington Residential Mortgage are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Ellington Residential is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Stifel Financial and Ellington Residential

The main advantage of trading using opposite Stifel Financial and Ellington Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stifel Financial 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.

The idea behind Stifel Financial and Ellington Residential Mortgage 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.