Correlation Between Ellington Financial and First Choice

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Can any of the company-specific risk be diversified away by investing in both Ellington Financial and First Choice 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 Financial and First Choice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ellington Financial LLC and First Choice Bancorp, you can compare the effects of market volatilities on Ellington Financial and First Choice 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 Financial with a short position of First Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Financial and First Choice.

Diversification Opportunities for Ellington Financial and First Choice

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Ellington and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Financial LLC and First Choice Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Choice Bancorp and Ellington Financial 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 Financial LLC are associated (or correlated) with First Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Choice Bancorp has no effect on the direction of Ellington Financial i.e., Ellington Financial and First Choice go up and down completely randomly.

Pair Corralation between Ellington Financial and First Choice

If you would invest (100.00) in First Choice Bancorp on December 30, 2023 and sell it today you would earn a total of  100.00  from holding First Choice Bancorp or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Ellington Financial LLC  vs.  First Choice Bancorp

 Performance 
       Timeline  
Ellington Financial LLC 

Risk-Adjusted Performance

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Over the last 90 days Ellington Financial LLC 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.
First Choice Bancorp 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days First Choice Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, First Choice is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Ellington Financial and First Choice Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ellington Financial and First Choice

The main advantage of trading using opposite Ellington Financial and First Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ellington Financial position performs unexpectedly, First Choice 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 First Choice will offset losses from the drop in First Choice's long position.
The idea behind Ellington Financial LLC and First Choice Bancorp 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.
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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