Correlation Between Orchid Island and Dynex Capital
Can any of the company-specific risk be diversified away by investing in both Orchid Island and Dynex Capital 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 Dynex Capital 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 Dynex Capital, you can compare the effects of market volatilities on Orchid Island and Dynex Capital 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 Dynex Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orchid Island and Dynex Capital.
Diversification Opportunities for Orchid Island and Dynex Capital
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Orchid and Dynex is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Dynex Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynex Capital 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 Dynex Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynex Capital has no effect on the direction of Orchid Island i.e., Orchid Island and Dynex Capital go up and down completely randomly.
Pair Corralation between Orchid Island and Dynex Capital
Considering the 90-day investment horizon Orchid Island Capital is expected to generate 1.28 times more return on investment than Dynex Capital. However, Orchid Island is 1.28 times more volatile than Dynex Capital. It trades about 0.05 of its potential returns per unit of risk. Dynex Capital is currently generating about 0.03 per unit of risk. If you would invest 774.00 in Orchid Island Capital on August 23, 2024 and sell it today you would earn a total of 8.00 from holding Orchid Island Capital or generate 1.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orchid Island Capital vs. Dynex Capital
Performance |
| Timeline |
| Orchid Island Capital |
| Dynex Capital |
Orchid Island and Dynex Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orchid Island and Dynex Capital
The main advantage of trading using opposite Orchid Island and Dynex Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orchid Island position performs unexpectedly, Dynex Capital 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 Dynex Capital will offset losses from the drop in Dynex Capital'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 |
| Dynex Capital vs. Ellington Residential Mortgage | Dynex Capital vs. Orchid Island Capital | Dynex Capital vs. ARMOUR Residential REIT | Dynex Capital vs. Ellington Financial |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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