Correlation Between Orchid Island and Nuveen Amt-free

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

Diversification Opportunities for Orchid Island and Nuveen Amt-free

-0.27

Correlation Coefficient

Orchid Island  Nuveen Amt-free

Very good diversification

The 3 months correlation between Orchid and Nuveen is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Nuveen Amt Free Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Amt Free 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 Nuveen Amt-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Amt Free has no effect on the direction of Orchid Island i.e., Orchid Island and Nuveen Amt-free go up and down completely randomly.

Pair Corralation between Orchid Island and Nuveen Amt-free

Considering the 90-day investment horizon Orchid Island Capital is expected to generate 1.82 times more return on investment than Nuveen Amt-free. However, Orchid Island is 1.82 times more volatile than Nuveen Amt Free Municipal. It trades about 0.09 of its potential returns per unit of risk. Nuveen Amt Free Municipal is currently generating about -0.17 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Orchid Island Capital  vs.  Nuveen Amt Free Municipal

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.

Nuveen Amt Free

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Amt Free Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly stable basic indicators, Nuveen Amt-free is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Orchid Island and Nuveen Amt-free

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

The idea behind Orchid Island Capital and Nuveen Amt Free Municipal 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..