Correlation Between Orchid Island and Taiwan Closed

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

Diversification Opportunities for Orchid Island and Taiwan Closed

-0.45

Correlation Coefficient

Orchid Island  Taiwan Closed

Very good diversification

The 3 months correlation between Orchid and Taiwan is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Taiwan Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Closed 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 Taiwan Closed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Closed has no effect on the direction of Orchid Island i.e., Orchid Island and Taiwan Closed go up and down completely randomly.

Pair Corralation between Orchid Island and Taiwan Closed

Considering the 90-day investment horizon Orchid Island Capital is expected to generate 0.88 times more return on investment than Taiwan Closed. However, Orchid Island Capital is 1.13 times less risky than Taiwan Closed. It trades about 0.1 of its potential returns per unit of risk. Taiwan Closed is currently generating about -0.11 per unit of risk. If you would invest  754.00  in Orchid Island Capital on December 27, 2024 and sell it today you would earn a total of  60.00  from holding Orchid Island Capital or generate 7.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Orchid Island Capital  vs.  Taiwan Closed

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 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 April 2025.

Taiwan Closed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taiwan Closed has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest fragile performance, the Fund's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with Orchid Island and Taiwan Closed

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

The idea behind Orchid Island Capital and Taiwan Closed 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.