Correlation Between Blackstone Mortgage and Orchid Island

Can any of the company-specific risk be diversified away by investing in both Blackstone Mortgage and Orchid Island 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 Blackstone Mortgage and Orchid Island into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Blackstone Mortgage Trust and Orchid Island Capital, you can compare the effects of market volatilities on Blackstone Mortgage and Orchid Island 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 Blackstone Mortgage with a short position of Orchid Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackstone Mortgage and Orchid Island.

Diversification Opportunities for Blackstone Mortgage and Orchid Island

0.86

Correlation Coefficient

Blackstone Mortgage  Orchid Island

Very poor diversification

The 3 months correlation between Blackstone and Orchid is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Blackstone Mortgage Trust and Orchid Island Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orchid Island Capital and Blackstone Mortgage 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 Blackstone Mortgage Trust are associated (or correlated) with Orchid Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orchid Island Capital has no effect on the direction of Blackstone Mortgage i.e., Blackstone Mortgage and Orchid Island go up and down completely randomly.

Pair Corralation between Blackstone Mortgage and Orchid Island

Given the investment horizon of 90 days Blackstone Mortgage is expected to generate 1.22 times less return on investment than Orchid Island. In addition to that, Blackstone Mortgage is 1.29 times more volatile than Orchid Island Capital. It trades about 0.11 of its total potential returns per unit of risk. Orchid Island Capital is currently generating about 0.18 per unit of volatility. If you would invest  744.00  in Orchid Island Capital on December 4, 2024 and sell it today you would earn a total of  99.00  from holding Orchid Island Capital or generate 13.31% return on investment over 90 days.

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

Blackstone Mortgage Trust  vs.  Orchid Island Capital

Blackstone Mortgage Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackstone Mortgage Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Blackstone Mortgage may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Orchid Island Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orchid Island Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Orchid Island exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackstone Mortgage and Orchid Island

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

The idea behind Blackstone Mortgage Trust and Orchid Island Capital 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.