Correlation Between Rithm Property and Ellington Financial

Can any of the company-specific risk be diversified away by investing in both Rithm Property 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 Property 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 Property Trust and Ellington Financial, you can compare the effects of market volatilities on Rithm Property 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 Property with a short position of Ellington Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rithm Property and Ellington Financial.

Diversification Opportunities for Rithm Property and Ellington Financial

-0.67

Correlation Coefficient

Rithm Property  Ellington Financial

Excellent diversification

The 3 months correlation between Rithm and Ellington is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Property Trust and Ellington Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Financial and Rithm Property 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 Property Trust 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 Property i.e., Rithm Property and Ellington Financial go up and down completely randomly.

Pair Corralation between Rithm Property and Ellington Financial

Considering the 90-day investment horizon Rithm Property Trust is expected to under-perform the Ellington Financial. In addition to that, Rithm Property is 9.2 times more volatile than Ellington Financial. It trades about -0.1 of its total potential returns per unit of risk. Ellington Financial is currently generating about 0.1 per unit of volatility. If you would invest  2,526  in Ellington Financial on September 25, 2024 and sell it today you would earn a total of  30.00  from holding Ellington Financial or generate 1.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.63%
Values	Daily Returns

Rithm Property Trust  vs.  Ellington Financial

Rithm Property Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rithm Property Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ellington Financial

Risk-Adjusted Performance

0 of 100

OK

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 fundamental indicators, Ellington Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rithm Property and Ellington Financial

The main advantage of trading using opposite Rithm Property and Ellington Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rithm Property 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 Property Trust 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.