Correlation Between Cherry Hill and Ellington Residential

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

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

Diversification Opportunities for Cherry Hill and Ellington Residential

0.36

Correlation Coefficient

Cherry Hill  Ellington Residential

Weak diversification

The 3 months correlation between Cherry and Ellington is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cherry Hill Mortgage and Ellington Residential Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Residential and Cherry Hill 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 Cherry Hill Mortgage 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 Cherry Hill i.e., Cherry Hill and Ellington Residential go up and down completely randomly.

Pair Corralation between Cherry Hill and Ellington Residential

Given the investment horizon of 90 days Cherry Hill Mortgage is expected to under-perform the Ellington Residential. In addition to that, Cherry Hill is 1.7 times more volatile than Ellington Residential Mortgage. It trades about -0.18 of its total potential returns per unit of risk. Ellington Residential Mortgage is currently generating about 0.02 per unit of volatility. If you would invest  676.00  in Ellington Residential Mortgage on August 30, 2024 and sell it today you would earn a total of  9.00  from holding Ellington Residential Mortgage or generate 1.33% return on investment over 90 days.

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

Cherry Hill Mortgage  vs.  Ellington Residential Mortgage

Cherry Hill Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cherry Hill Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Ellington Residential

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ellington Residential Mortgage are ranked lower than 1 (%) 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 Cherry Hill and Ellington Residential

The main advantage of trading using opposite Cherry Hill and Ellington Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cherry Hill 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 Cherry Hill Mortgage 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.