Correlation Between Ellington Residential and Modiv

Can any of the company-specific risk be diversified away by investing in both Ellington Residential and Modiv 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 Modiv 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 Modiv Inc, you can compare the effects of market volatilities on Ellington Residential and Modiv 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 Modiv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ellington Residential and Modiv.

Diversification Opportunities for Ellington Residential and Modiv

-0.19

Correlation Coefficient

Ellington Residential  Modiv

Good diversification

The 3 months correlation between Ellington and Modiv is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and Modiv Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modiv Inc 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 Modiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modiv Inc has no effect on the direction of Ellington Residential i.e., Ellington Residential and Modiv go up and down completely randomly.

Pair Corralation between Ellington Residential and Modiv

Given the investment horizon of 90 days Ellington Residential Mortgage is expected to generate 0.89 times more return on investment than Modiv. However, Ellington Residential Mortgage is 1.12 times less risky than Modiv. It trades about 0.17 of its potential returns per unit of risk. Modiv Inc is currently generating about 0.02 per unit of risk. If you would invest  510.00  in Ellington Residential Mortgage on May 6, 2025 and sell it today you would earn a total of  63.00  from holding Ellington Residential Mortgage or generate 12.35% return on investment over 90 days.

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

Ellington Residential Mortgage  vs.  Modiv Inc

Ellington Residential

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ellington Residential Mortgage are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Ellington Residential may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Modiv Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Modiv Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Modiv is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ellington Residential and Modiv

The main advantage of trading using opposite Ellington Residential and Modiv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ellington Residential position performs unexpectedly, Modiv 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 Modiv will offset losses from the drop in Modiv's long position.

The idea behind Ellington Residential Mortgage and Modiv Inc 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 Global Correlations module to find global opportunities by holding instruments from different markets.