Correlation Between Chicago Atlantic and Ellington Financial

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

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

Diversification Opportunities for Chicago Atlantic and Ellington Financial

-0.08

Correlation Coefficient

Chicago Atlantic  Ellington Financial

Good diversification

The 3 months correlation between Chicago and Ellington is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Chicago Atlantic Real and Ellington Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Financial and Chicago Atlantic 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 Chicago Atlantic Real 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 Chicago Atlantic i.e., Chicago Atlantic and Ellington Financial go up and down completely randomly.

Pair Corralation between Chicago Atlantic and Ellington Financial

Given the investment horizon of 90 days Chicago Atlantic Real is expected to generate 0.73 times more return on investment than Ellington Financial. However, Chicago Atlantic Real is 1.38 times less risky than Ellington Financial. It trades about 0.43 of its potential returns per unit of risk. Ellington Financial is currently generating about 0.17 per unit of risk. If you would invest  1,512  in Chicago Atlantic Real on September 1, 2024 and sell it today you would earn a total of  97.00  from holding Chicago Atlantic Real or generate 6.42% return on investment over 90 days.

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

Chicago Atlantic Real  vs.  Ellington Financial

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.

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 Chicago Atlantic and Ellington Financial

The main advantage of trading using opposite Chicago Atlantic and Ellington Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chicago Atlantic 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 Chicago Atlantic Real 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.