Correlation Between Angel Oak and Orchid Island
Can any of the company-specific risk be diversified away by investing in both Angel Oak and Orchid Island 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 Angel Oak and Orchid Island into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Angel Oak Mortgage and Orchid Island Capital, you can compare the effects of market volatilities on Angel Oak and Orchid Island 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 Angel Oak with a short position of Orchid Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Angel Oak and Orchid Island.
Diversification Opportunities for Angel Oak and Orchid Island
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Angel and Orchid is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Angel Oak Mortgage and Orchid Island Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orchid Island Capital and Angel Oak 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 Angel Oak Mortgage are associated (or correlated) with Orchid Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orchid Island Capital has no effect on the direction of Angel Oak i.e., Angel Oak and Orchid Island go up and down completely randomly.
Pair Corralation between Angel Oak and Orchid Island
Given the investment horizon of 90 days Angel Oak Mortgage is expected to generate 1.64 times more return on investment than Orchid Island. However, Angel Oak is 1.64 times more volatile than Orchid Island Capital. It trades about 0.2 of its potential returns per unit of risk. Orchid Island Capital is currently generating about 0.14 per unit of risk. If you would invest 895.00 in Angel Oak Mortgage on August 27, 2024 and sell it today you would earn a total of 66.00 from holding Angel Oak Mortgage or generate 7.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Angel Oak Mortgage vs. Orchid Island Capital
Performance |
| Timeline |
| Angel Oak Mortgage |
| Orchid Island Capital |
Angel Oak and Orchid Island Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Angel Oak and Orchid Island
The main advantage of trading using opposite Angel Oak and Orchid Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Angel Oak position performs unexpectedly, Orchid Island 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 Orchid Island will offset losses from the drop in Orchid Island's long position.| Angel Oak vs. Granite Point Mortgage | Angel Oak vs. MFA Financial | Angel Oak vs. Two Harbors Investments | Angel Oak vs. PennyMac Mortgage Investment |
| Orchid Island vs. Blackstone Mortgage Trust | Orchid Island vs. Omega Healthcare Investors | Orchid Island vs. Medical Properties Trust |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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