Correlation Between Ellington Residential and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Ellington Residential and ARMOUR Residential 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 Residential and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ellington Residential Mortgage and ARMOUR Residential REIT, you can compare the effects of market volatilities on Ellington Residential and ARMOUR Residential 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 Residential with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Residential and ARMOUR Residential.
Diversification Opportunities for Ellington Residential and ARMOUR Residential
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ellington and ARMOUR is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT and Ellington Residential 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 Residential Mortgage are associated (or correlated) with ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of Ellington Residential i.e., Ellington Residential and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Ellington Residential and ARMOUR Residential
Given the investment horizon of 90 days Ellington Residential Mortgage is expected to under-perform the ARMOUR Residential. But the stock apears to be less risky and, when comparing its historical volatility, Ellington Residential Mortgage is 1.13 times less risky than ARMOUR Residential. The stock trades about -0.08 of its potential returns per unit of risk. The ARMOUR Residential REIT is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 1,895 in ARMOUR Residential REIT on January 24, 2024 and sell it today you would lose (58.00) from holding ARMOUR Residential REIT or give up 3.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ellington Residential Mortgage vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Ellington Residential |
| ARMOUR Residential REIT |
Ellington Residential and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ellington Residential and ARMOUR Residential
The main advantage of trading using opposite Ellington Residential and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ellington Residential position performs unexpectedly, ARMOUR Residential 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 ARMOUR Residential will offset losses from the drop in ARMOUR Residential's long position.| Ellington Residential vs. Dynex Capital | Ellington Residential vs. Orchid Island Capital | Ellington Residential vs. ARMOUR Residential REIT | Ellington Residential vs. Ready Capital Corp |
| ARMOUR Residential vs. Ellington Financial LLC | ARMOUR Residential vs. Two Harbors Investments | ARMOUR Residential vs. Dynex Capital | ARMOUR Residential vs. Ellington Residential Mortgage |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |