Correlation Between Rithm Capital and Ellington Financial

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

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

Diversification Opportunities for Rithm Capital and Ellington Financial

-0.77

Correlation Coefficient

Rithm Capital  Ellington Financial

Pay attention - limited upside

The 3 months correlation between Rithm and Ellington is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Capital Corp and Ellington Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Financial and Rithm Capital 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 Rithm Capital Corp 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 Rithm Capital i.e., Rithm Capital and Ellington Financial go up and down completely randomly.

Pair Corralation between Rithm Capital and Ellington Financial

Assuming the 90 days trading horizon Rithm Capital Corp is expected to under-perform the Ellington Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Rithm Capital Corp is 4.55 times less risky than Ellington Financial. The preferred stock trades about -0.04 of its potential returns per unit of risk. The Ellington Financial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,196  in Ellington Financial on September 1, 2024 and sell it today you would earn a total of  40.00  from holding Ellington Financial or generate 3.34% return on investment over 90 days.

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

Rithm Capital Corp  vs.  Ellington Financial

Rithm Capital Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Capital Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Rithm Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 Rithm Capital and Ellington Financial

The main advantage of trading using opposite Rithm Capital and Ellington Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rithm Capital 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 Rithm Capital Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.