Correlation Between Orchid Island and Cornerstone Strategic
Can any of the company-specific risk be diversified away by investing in both Orchid Island and Cornerstone Strategic 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 Cornerstone Strategic 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 Cornerstone Strategic Value, you can compare the effects of market volatilities on Orchid Island and Cornerstone Strategic 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 Cornerstone Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orchid Island and Cornerstone Strategic.
Diversification Opportunities for Orchid Island and Cornerstone Strategic
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Orchid and Cornerstone is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Cornerstone Strategic Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornerstone Strategic 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 Cornerstone Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornerstone Strategic has no effect on the direction of Orchid Island i.e., Orchid Island and Cornerstone Strategic go up and down completely randomly.
Pair Corralation between Orchid Island and Cornerstone Strategic
Considering the 90-day investment horizon Orchid Island is expected to generate 3.67 times less return on investment than Cornerstone Strategic. In addition to that, Orchid Island is 1.38 times more volatile than Cornerstone Strategic Value. It trades about 0.07 of its total potential returns per unit of risk. Cornerstone Strategic Value is currently generating about 0.36 per unit of volatility. If you would invest 847.00 in Cornerstone Strategic Value on November 1, 2024 and sell it today you would earn a total of 43.00 from holding Cornerstone Strategic Value or generate 5.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orchid Island Capital vs. Cornerstone Strategic Value
Performance |
| Timeline |
| Orchid Island Capital |
| Cornerstone Strategic |
Orchid Island and Cornerstone Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orchid Island and Cornerstone Strategic
The main advantage of trading using opposite Orchid Island and Cornerstone Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orchid Island position performs unexpectedly, Cornerstone Strategic 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 Cornerstone Strategic will offset losses from the drop in Cornerstone Strategic's long position.| Orchid Island vs. AGNC Investment Corp | Orchid Island vs. Two Harbors Investments | Orchid Island vs. Invesco Mortgage Capital | Orchid Island vs. Chimera 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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