Correlation Between Ellington Financial and Great Ajax

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

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

Diversification Opportunities for Ellington Financial and Great Ajax

0.76

Correlation Coefficient

Ellington Financial  Great Ajax

Poor diversification

The 3 months correlation between Ellington and Great is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Financial and Great Ajax Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Ajax Corp and Ellington 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 Ellington Financial are associated (or correlated) with Great Ajax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Ajax Corp has no effect on the direction of Ellington Financial i.e., Ellington Financial and Great Ajax go up and down completely randomly.

Pair Corralation between Ellington Financial and Great Ajax

Considering the 90-day investment horizon Ellington Financial is expected to under-perform the Great Ajax. But the stock apears to be less risky and, when comparing its historical volatility, Ellington Financial is 2.41 times less risky than Great Ajax. The stock trades about -0.05 of its potential returns per unit of risk. The Great Ajax Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  313.00  in Great Ajax Corp on September 2, 2024 and sell it today you would lose (9.00) from holding Great Ajax Corp or give up 2.88% of portfolio value over 90 days.

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

Ellington Financial  vs.  Great Ajax Corp

Ellington Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ellington Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Ellington Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Great Ajax Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Ajax Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Great Ajax is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ellington Financial and Great Ajax

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

The idea behind Ellington Financial and Great Ajax Corp 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.