Correlation Between Ford and Orchid Island
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Orchid Island into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Orchid Island Capital, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Orchid Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Orchid Island.
Diversification Opportunities for Ford and Orchid Island
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and Orchid is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Orchid Island go up and down completely randomly.
Pair Corralation between Ford and Orchid Island
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.92 times more return on investment than Orchid Island. However, Ford is 1.92 times more volatile than Orchid Island Capital. It trades about 0.18 of its potential returns per unit of risk. Orchid Island Capital is currently generating about 0.08 per unit of risk. If you would invest 1,027 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 83.00 from holding Ford Motor or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Orchid Island Capital
Performance |
| Timeline |
| Ford Motor |
| Orchid Island Capital |
Ford and Orchid Island Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Orchid Island
The main advantage of trading using opposite Ford and Orchid Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Orchid Island Capital 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.| Orchid Island vs. Ellington Residential Mortgage | Orchid Island vs. Ares Commercial Real | Orchid Island vs. Cherry Hill Mortgage | Orchid Island vs. AGNC Investment Corp |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |