Correlation Between Orchid Island and Ellington Residential
Can any of the company-specific risk be diversified away by investing in both Orchid Island and Ellington Residential 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 Ellington Residential 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 Ellington Residential Mortgage, you can compare the effects of market volatilities on Orchid Island and Ellington Residential 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 Ellington Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orchid Island and Ellington Residential.
Diversification Opportunities for Orchid Island and Ellington Residential
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Orchid and Ellington is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Ellington Residential Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Residential 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 Ellington Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellington Residential has no effect on the direction of Orchid Island i.e., Orchid Island and Ellington Residential go up and down completely randomly.
Pair Corralation between Orchid Island and Ellington Residential
Considering the 90-day investment horizon Orchid Island is expected to generate 2.27 times less return on investment than Ellington Residential. In addition to that, Orchid Island is 1.19 times more volatile than Ellington Residential Mortgage. It trades about 0.01 of its total potential returns per unit of risk. Ellington Residential Mortgage is currently generating about 0.03 per unit of volatility. If you would invest 563.00 in Ellington Residential Mortgage on August 23, 2024 and sell it today you would earn a total of 102.00 from holding Ellington Residential Mortgage or generate 18.12% 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. Ellington Residential Mortgage
Performance |
| Timeline |
| Orchid Island Capital |
| Ellington Residential |
Orchid Island and Ellington Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orchid Island and Ellington Residential
The main advantage of trading using opposite Orchid Island and Ellington Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orchid Island position performs unexpectedly, Ellington Residential 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 Ellington Residential will offset losses from the drop in Ellington Residential'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 |
| Ellington Residential vs. Dynex Capital | Ellington Residential vs. Orchid Island Capital | Ellington Residential vs. ARMOUR Residential REIT | Ellington Residential vs. Ready Capital 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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