Correlation Between Orchid Island and Pgim Global

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

Diversification Opportunities for Orchid Island and Pgim Global

0.64

Correlation Coefficient

Orchid Island  Pgim Global

Poor diversification

The 3 months correlation between Orchid and Pgim is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Pgim Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pgim Global High 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 Pgim Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pgim Global High has no effect on the direction of Orchid Island i.e., Orchid Island and Pgim Global go up and down completely randomly.

Pair Corralation between Orchid Island and Pgim Global

Considering the 90-day investment horizon Orchid Island is expected to generate 1.82 times less return on investment than Pgim Global. In addition to that, Orchid Island is 2.25 times more volatile than Pgim Global High. It trades about 0.03 of its total potential returns per unit of risk. Pgim Global High is currently generating about 0.13 per unit of volatility. If you would invest  1,036  in Pgim Global High on October 7, 2024 and sell it today you would earn a total of  228.00  from holding Pgim Global High or generate 22.01% 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.  Pgim Global High

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.

Pgim Global High

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pgim Global High are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Pgim Global is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Orchid Island and Pgim Global

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

The idea behind Orchid Island Capital and Pgim Global High 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.