For years, I’d known of my aunt Ellen as Nelly. When I found out that her name was really Ellen, I asked why we called her Nelly. I was told that it was because Nelly was Ellen spelled backwards.

This is known as a folk etymology which is a way of calling b.s.

A familial way of referring to Ellen would be “our Ellen” or “my Ellen”. The “my” in “my Ellen” is a contraction of the old English “mine”.

Over time, “mine Ellen” became “my Nellen” (this is known as bracketing) and then “my Nelly”.

As an aside, this is why “Ned” is a familial name for”Ed”. “Mine Ed” became “My Ned”.

To me, this is a lot less stupid than the “spelled backwards” theory.