Correlation Between Orchid Island and MFA Financial
Can any of the company-specific risk be diversified away by investing in both Orchid Island and MFA Financial 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 MFA Financial 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 MFA Financial, you can compare the effects of market volatilities on Orchid Island and MFA Financial 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 MFA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orchid Island and MFA Financial.
Diversification Opportunities for Orchid Island and MFA Financial
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Orchid and MFA is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and MFA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFA Financial 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 MFA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFA Financial has no effect on the direction of Orchid Island i.e., Orchid Island and MFA Financial go up and down completely randomly.
Pair Corralation between Orchid Island and MFA Financial
Considering the 90-day investment horizon Orchid Island Capital is expected to generate 0.55 times more return on investment than MFA Financial. However, Orchid Island Capital is 1.81 times less risky than MFA Financial. It trades about 0.14 of its potential returns per unit of risk. MFA Financial is currently generating about 0.03 per unit of risk. If you would invest 781.00 in Orchid Island Capital on October 21, 2024 and sell it today you would earn a total of 20.00 from holding Orchid Island Capital or generate 2.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orchid Island Capital vs. MFA Financial
Performance |
| Timeline |
| Orchid Island Capital |
| MFA Financial |
Orchid Island and MFA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orchid Island and MFA Financial
The main advantage of trading using opposite Orchid Island and MFA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orchid Island position performs unexpectedly, MFA Financial 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 MFA Financial will offset losses from the drop in MFA Financial'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 |
| MFA Financial vs. Chimera Investment | MFA Financial vs. ARMOUR Residential REIT | MFA Financial vs. Orchid Island Capital | MFA Financial vs. Invesco Mortgage 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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