Correlation Between US Foods and ELLINGTON FINL

Can any of the company-specific risk be diversified away by investing in both US Foods and ELLINGTON FINL 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 US Foods and ELLINGTON FINL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US Foods Holding and ELLINGTON FINL INC, you can compare the effects of market volatilities on US Foods and ELLINGTON FINL 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 US Foods with a short position of ELLINGTON FINL. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Foods and ELLINGTON FINL.

Diversification Opportunities for US Foods and ELLINGTON FINL

0.81

Correlation Coefficient

US Foods  ELLINGTON FINL

Very poor diversification

The 3 months correlation between UFH and ELLINGTON is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding US Foods Holding and ELLINGTON FINL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELLINGTON FINL INC and US Foods 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 US Foods Holding are associated (or correlated) with ELLINGTON FINL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELLINGTON FINL INC has no effect on the direction of US Foods i.e., US Foods and ELLINGTON FINL go up and down completely randomly.

Pair Corralation between US Foods and ELLINGTON FINL

Assuming the 90 days horizon US Foods Holding is expected to generate 1.81 times more return on investment than ELLINGTON FINL. However, US Foods is 1.81 times more volatile than ELLINGTON FINL INC. It trades about 0.17 of its potential returns per unit of risk. ELLINGTON FINL INC is currently generating about 0.08 per unit of risk. If you would invest  5,700  in US Foods Holding on September 23, 2024 and sell it today you would earn a total of  750.00  from holding US Foods Holding or generate 13.16% return on investment over 90 days.

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

US Foods Holding  vs.  ELLINGTON FINL INC

US Foods Holding

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Foods Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, US Foods reported solid returns over the last few months and may actually be approaching a breakup point.

ELLINGTON FINL INC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ELLINGTON FINL INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ELLINGTON FINL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with US Foods and ELLINGTON FINL

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

The idea behind US Foods Holding and ELLINGTON FINL 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.

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.