Correlation Between Orchid Island and Eaton Vance

Can any of the company-specific risk be diversified away by investing in both Orchid Island and Eaton Vance 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 Eaton Vance 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 Eaton Vance Tax Managed, you can compare the effects of market volatilities on Orchid Island and Eaton Vance 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 Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orchid Island and Eaton Vance.

Diversification Opportunities for Orchid Island and Eaton Vance

0.23

Correlation Coefficient

Orchid Island  Eaton Vance

Modest diversification

The 3 months correlation between Orchid and Eaton is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Eaton Vance Tax Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Tax 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Tax has no effect on the direction of Orchid Island i.e., Orchid Island and Eaton Vance go up and down completely randomly.

Pair Corralation between Orchid Island and Eaton Vance

Considering the 90-day investment horizon Orchid Island Capital is expected to generate 1.14 times more return on investment than Eaton Vance. However, Orchid Island is 1.14 times more volatile than Eaton Vance Tax Managed. It trades about 0.09 of its potential returns per unit of risk. Eaton Vance Tax Managed is currently generating about -0.19 per unit of risk. If you would invest  781.00  in Orchid Island Capital on October 7, 2024 and sell it today you would earn a total of  12.00  from holding Orchid Island Capital or generate 1.54% return on investment over 90 days.

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

Orchid Island Capital  vs.  Eaton Vance Tax Managed

Orchid Island Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orchid Island Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Orchid Island may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Eaton Vance Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance Tax Managed has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable basic indicators, Eaton Vance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Orchid Island and Eaton Vance

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

The idea behind Orchid Island Capital and Eaton Vance Tax Managed 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.