Correlation Between Orchid Island and Pimco New

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

Diversification Opportunities for Orchid Island and Pimco New

0.79

Correlation Coefficient

Orchid Island  Pimco New

Poor diversification

The 3 months correlation between Orchid and Pimco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Pimco New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco New York 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 Pimco New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco New York has no effect on the direction of Orchid Island i.e., Orchid Island and Pimco New go up and down completely randomly.

Pair Corralation between Orchid Island and Pimco New

Considering the 90-day investment horizon Orchid Island Capital is expected to generate 2.04 times more return on investment than Pimco New. However, Orchid Island is 2.04 times more volatile than Pimco New York. It trades about 0.12 of its potential returns per unit of risk. Pimco New York is currently generating about 0.07 per unit of risk. If you would invest  753.00  in Orchid Island Capital on December 24, 2024 and sell it today you would earn a total of  69.00  from holding Orchid Island Capital or generate 9.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Orchid Island Capital  vs.  Pimco New York

Orchid Island Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orchid Island Capital are ranked lower than 9 (%) 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 April 2025.

Pimco New York

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco New York are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong basic indicators, Pimco New is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Orchid Island and Pimco New

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

The idea behind Orchid Island Capital and Pimco New York 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.