Correlation Between Ellington Financial and EZCORP

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

Diversification Opportunities for Ellington Financial and EZCORP

-0.29

Correlation Coefficient

Ellington Financial  EZCORP

Very good diversification

The 3 months correlation between Ellington and EZCORP is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ellington Financial LLC and EZCORP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EZCORP Inc 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 EZCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EZCORP Inc has no effect on the direction of Ellington Financial i.e., Ellington Financial and EZCORP go up and down completely randomly.

Pair Corralation between Ellington Financial and EZCORP

Considering the 90-day investment horizon Ellington Financial LLC is expected to generate 0.56 times more return on investment than EZCORP. However, Ellington Financial LLC is 1.8 times less risky than EZCORP. It trades about 0.16 of its potential returns per unit of risk. EZCORP Inc is currently generating about -0.04 per unit of risk. If you would invest  1,115  in Ellington Financial LLC on February 4, 2024 and sell it today you would earn a total of  50.00  from holding Ellington Financial LLC or generate 4.48% return on investment over 90 days.

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

Ellington Financial LLC  vs.  EZCORP Inc

Ellington Financial LLC

Risk-Adjusted Performance

0 of 100

Very Weak

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

EZCORP Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EZCORP Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, EZCORP 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 Financial and EZCORP

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

The idea behind Ellington Financial LLC and EZCORP 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 Stocks Directory module to find actively traded stocks across global markets.