Correlation Between Orchid Island and China Fund
Can any of the company-specific risk be diversified away by investing in both Orchid Island and China Fund 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 China Fund 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 China Fund, you can compare the effects of market volatilities on Orchid Island and China Fund 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 China Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orchid Island and China Fund.
Diversification Opportunities for Orchid Island and China Fund
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Orchid and China is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and China Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Fund 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 China Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Fund has no effect on the direction of Orchid Island i.e., Orchid Island and China Fund go up and down completely randomly.
Pair Corralation between Orchid Island and China Fund
Considering the 90-day investment horizon Orchid Island Capital is expected to generate 0.67 times more return on investment than China Fund. However, Orchid Island Capital is 1.49 times less risky than China Fund. It trades about 0.18 of its potential returns per unit of risk. China Fund is currently generating about 0.08 per unit of risk. If you would invest 751.00 in Orchid Island Capital on December 2, 2024 and sell it today you would earn a total of 104.00 from holding Orchid Island Capital or generate 13.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Orchid Island Capital vs. China Fund
Performance |
Timeline |
Orchid Island Capital |
China Fund |
Orchid Island and China Fund Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Orchid Island and China Fund
The main advantage of trading using opposite Orchid Island and China Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orchid Island position performs unexpectedly, China Fund 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 China Fund will offset losses from the drop in China Fund's long position.Orchid Island vs. AGNC Investment Corp | Orchid Island vs. Two Harbors Investments | Orchid Island vs. Invesco Mortgage Capital | Orchid Island vs. Chimera Investment |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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