Correlation Between Ellington Residential and Ready Capital

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

Diversification Opportunities for Ellington Residential and Ready Capital

0.45

Correlation Coefficient

Ellington Residential  Ready Capital

Very weak diversification

The 3 months correlation between Ellington and Ready is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Residential Mortgage and Ready Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ready Capital Corp 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 Ready Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ready Capital Corp has no effect on the direction of Ellington Residential i.e., Ellington Residential and Ready Capital go up and down completely randomly.

Pair Corralation between Ellington Residential and Ready Capital

Given the investment horizon of 90 days Ellington Residential Mortgage is expected to generate 0.48 times more return on investment than Ready Capital. However, Ellington Residential Mortgage is 2.09 times less risky than Ready Capital. It trades about 0.16 of its potential returns per unit of risk. Ready Capital Corp is currently generating about -0.01 per unit of risk. If you would invest  508.00  in Ellington Residential Mortgage on May 5, 2025 and sell it today you would earn a total of  58.00  from holding Ellington Residential Mortgage or generate 11.42% return on investment over 90 days.

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

Ellington Residential Mortgage  vs.  Ready Capital Corp

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 12 (%) 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.

Ready Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ready Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Ready Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ellington Residential and Ready Capital

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

The idea behind Ellington Residential Mortgage and Ready Capital Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.