Correlation Between Orchid Island and Apollo Commercial

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

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

Diversification Opportunities for Orchid Island and Apollo Commercial

0.52

Correlation Coefficient

Orchid Island  Apollo Commercial

Very weak diversification

The 3 months correlation between Orchid and Apollo is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Apollo Commercial Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Commercial Real and Orchid Island 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 Orchid Island Capital are associated (or correlated) with Apollo Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Commercial Real has no effect on the direction of Orchid Island i.e., Orchid Island and Apollo Commercial go up and down completely randomly.

Pair Corralation between Orchid Island and Apollo Commercial

Considering the 90-day investment horizon Orchid Island is expected to generate 2.73 times less return on investment than Apollo Commercial. In addition to that, Orchid Island is 1.04 times more volatile than Apollo Commercial Real. It trades about 0.08 of its total potential returns per unit of risk. Apollo Commercial Real is currently generating about 0.23 per unit of volatility. If you would invest  884.00  in Apollo Commercial Real on August 30, 2024 and sell it today you would earn a total of  46.00  from holding Apollo Commercial Real or generate 5.2% return on investment over 90 days.

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

Orchid Island Capital  vs.  Apollo Commercial Real

Orchid Island Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

Apollo Commercial Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apollo Commercial Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Orchid Island and Apollo Commercial

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

The idea behind Orchid Island Capital and Apollo Commercial Real 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.