Correlation Between Orchid Island and First Eagle
Can any of the company-specific risk be diversified away by investing in both Orchid Island and First Eagle 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 First Eagle 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 First Eagle Alternative, you can compare the effects of market volatilities on Orchid Island and First Eagle 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 First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orchid Island and First Eagle.
Diversification Opportunities for Orchid Island and First Eagle
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Orchid and First is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and First Eagle Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Alternative 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 First Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Eagle Alternative has no effect on the direction of Orchid Island i.e., Orchid Island and First Eagle go up and down completely randomly.
Pair Corralation between Orchid Island and First Eagle
Considering the 90-day investment horizon Orchid Island Capital is expected to generate 3.85 times more return on investment than First Eagle. However, Orchid Island is 3.85 times more volatile than First Eagle Alternative. It trades about 0.04 of its potential returns per unit of risk. First Eagle Alternative is currently generating about 0.09 per unit of risk. If you would invest 719.00 in Orchid Island Capital on November 9, 2024 and sell it today you would earn a total of 112.00 from holding Orchid Island Capital or generate 15.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orchid Island Capital vs. First Eagle Alternative
Performance |
| Timeline |
| Orchid Island Capital |
| First Eagle Alternative |
Orchid Island and First Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orchid Island and First Eagle
The main advantage of trading using opposite Orchid Island and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orchid Island position performs unexpectedly, First Eagle 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 First Eagle will offset losses from the drop in First Eagle'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 |
| First Eagle vs. Gladstone Investment | First Eagle vs. Customers Bancorp | First Eagle vs. Ready Capital | First Eagle vs. Great Elm Capital |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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