Correlation Between Rithm Capital and Orchid Island
Can any of the company-specific risk be diversified away by investing in both Rithm Capital and Orchid Island 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 Rithm Capital and Orchid Island into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rithm Capital Corp and Orchid Island Capital, you can compare the effects of market volatilities on Rithm Capital and Orchid Island 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 Rithm Capital with a short position of Orchid Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rithm Capital and Orchid Island.
Diversification Opportunities for Rithm Capital and Orchid Island
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rithm and Orchid is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Capital Corp and Orchid Island Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orchid Island Capital and Rithm Capital 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 Rithm Capital Corp are associated (or correlated) with Orchid Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orchid Island Capital has no effect on the direction of Rithm Capital i.e., Rithm Capital and Orchid Island go up and down completely randomly.
Pair Corralation between Rithm Capital and Orchid Island
Given the investment horizon of 90 days Rithm Capital Corp is expected to generate 0.95 times more return on investment than Orchid Island. However, Rithm Capital Corp is 1.05 times less risky than Orchid Island. It trades about 0.3 of its potential returns per unit of risk. Orchid Island Capital is currently generating about 0.14 per unit of risk. If you would invest 1,047 in Rithm Capital Corp on August 27, 2024 and sell it today you would earn a total of 68.00 from holding Rithm Capital Corp or generate 6.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rithm Capital Corp vs. Orchid Island Capital
Performance |
| Timeline |
| Rithm Capital Corp |
| Orchid Island Capital |
Rithm Capital and Orchid Island Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rithm Capital and Orchid Island
The main advantage of trading using opposite Rithm Capital and Orchid Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rithm Capital position performs unexpectedly, Orchid Island 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 Orchid Island will offset losses from the drop in Orchid Island's long position.| Rithm Capital vs. Starwood Property Trust | Rithm Capital vs. AGNC Investment Corp | Rithm Capital vs. Blackstone Mortgage Trust | Rithm Capital vs. Ares Commercial Real |
| Orchid Island vs. Blackstone Mortgage Trust | Orchid Island vs. Omega Healthcare Investors | Orchid Island vs. Medical Properties Trust |
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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