Correlation Between Orchid Island and Gabelli Equity

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

Diversification Opportunities for Orchid Island and Gabelli Equity

0.43

Correlation Coefficient

Orchid Island  Gabelli Equity

Very weak diversification

The 3 months correlation between Orchid and Gabelli is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Gabelli Equity Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity Trust 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 Gabelli Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Equity Trust has no effect on the direction of Orchid Island i.e., Orchid Island and Gabelli Equity go up and down completely randomly.

Pair Corralation between Orchid Island and Gabelli Equity

Considering the 90-day investment horizon Orchid Island Capital is expected to generate 0.96 times more return on investment than Gabelli Equity. However, Orchid Island Capital is 1.04 times less risky than Gabelli Equity. It trades about 0.36 of its potential returns per unit of risk. Gabelli Equity Trust is currently generating about 0.28 per unit of risk. If you would invest  774.00  in Orchid Island Capital on September 17, 2024 and sell it today you would earn a total of  30.00  from holding Orchid Island Capital or generate 3.88% 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.  Gabelli Equity Trust

Orchid Island Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orchid Island Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Orchid Island is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gabelli Equity Trust

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Equity Trust are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating basic indicators, Gabelli Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Orchid Island and Gabelli Equity

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

The idea behind Orchid Island Capital and Gabelli Equity Trust 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.