Correlation Between KKR Real and Ellington Financial

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

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

Diversification Opportunities for KKR Real and Ellington Financial

0.49

Correlation Coefficient

KKR Real  Ellington Financial

Very weak diversification

The 3 months correlation between KKR and Ellington is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding KKR Real Estate and Ellington Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Financial and KKR Real 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 KKR Real Estate are associated (or correlated) with Ellington Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellington Financial has no effect on the direction of KKR Real i.e., KKR Real and Ellington Financial go up and down completely randomly.

Pair Corralation between KKR Real and Ellington Financial

Given the investment horizon of 90 days KKR Real is expected to generate 2.06 times less return on investment than Ellington Financial. In addition to that, KKR Real is 1.07 times more volatile than Ellington Financial. It trades about 0.03 of its total potential returns per unit of risk. Ellington Financial is currently generating about 0.06 per unit of volatility. If you would invest  1,232  in Ellington Financial on August 31, 2024 and sell it today you would earn a total of  15.00  from holding Ellington Financial or generate 1.22% return on investment over 90 days.

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

KKR Real Estate  vs.  Ellington Financial

KKR Real Estate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, KKR Real is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with KKR Real and Ellington Financial

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

The idea behind KKR Real Estate and Ellington Financial 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.