Correlation Between Ellington Residential and Chicago Atlantic

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

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

Diversification Opportunities for Ellington Residential and Chicago Atlantic

0.06

Correlation Coefficient

Ellington Residential  Chicago Atlantic

Significant diversification

The 3 months correlation between Ellington and Chicago is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and Chicago Atlantic Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicago Atlantic Real and Ellington Residential 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 Residential Mortgage are associated (or correlated) with Chicago Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicago Atlantic Real has no effect on the direction of Ellington Residential i.e., Ellington Residential and Chicago Atlantic go up and down completely randomly.

Pair Corralation between Ellington Residential and Chicago Atlantic

Given the investment horizon of 90 days Ellington Residential is expected to generate 3.26 times less return on investment than Chicago Atlantic. In addition to that, Ellington Residential is 1.52 times more volatile than Chicago Atlantic Real. It trades about 0.02 of its total potential returns per unit of risk. Chicago Atlantic Real is currently generating about 0.11 per unit of volatility. If you would invest  1,533  in Chicago Atlantic Real on September 3, 2024 and sell it today you would earn a total of  78.00  from holding Chicago Atlantic Real or generate 5.09% return on investment over 90 days.

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

Ellington Residential Mortgage  vs.  Chicago Atlantic Real

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 latest stock price disarray, may contribute to short-term losses for the investors.

Chicago Atlantic Real

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chicago Atlantic Real are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Chicago Atlantic is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ellington Residential and Chicago Atlantic

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

The idea behind Ellington Residential Mortgage and Chicago Atlantic Real 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.