Correlation Between Orchid Island and Blackrock Muniholdings

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

Diversification Opportunities for Orchid Island and Blackrock Muniholdings

0.68

Correlation Coefficient

Orchid Island  Blackrock Muniholdings

Poor diversification

The 3 months correlation between Orchid and Blackrock is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Blackrock Muniholdings Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniholdings 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 Blackrock Muniholdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Muniholdings has no effect on the direction of Orchid Island i.e., Orchid Island and Blackrock Muniholdings go up and down completely randomly.

Pair Corralation between Orchid Island and Blackrock Muniholdings

Considering the 90-day investment horizon Orchid Island is expected to generate 1.64 times less return on investment than Blackrock Muniholdings. In addition to that, Orchid Island is 3.0 times more volatile than Blackrock Muniholdings Quality. It trades about 0.01 of its total potential returns per unit of risk. Blackrock Muniholdings Quality is currently generating about 0.07 per unit of volatility. If you would invest  897.00  in Blackrock Muniholdings Quality on September 13, 2024 and sell it today you would earn a total of  183.00  from holding Blackrock Muniholdings Quality or generate 20.4% 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.  Blackrock Muniholdings Quality

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.

Blackrock Muniholdings

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Muniholdings Quality are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound basic indicators, Blackrock Muniholdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Orchid Island and Blackrock Muniholdings

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

The idea behind Orchid Island Capital and Blackrock Muniholdings Quality 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.