Correlation Between Regional Management and Orchid Island
Can any of the company-specific risk be diversified away by investing in both Regional Management 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 Regional Management and Orchid Island into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regional Management Corp and Orchid Island Capital, you can compare the effects of market volatilities on Regional Management 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 Regional Management with a short position of Orchid Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Management and Orchid Island.
Diversification Opportunities for Regional Management and Orchid Island
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Regional and Orchid is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management 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 Regional Management 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 Regional Management 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 Regional Management i.e., Regional Management and Orchid Island go up and down completely randomly.
Pair Corralation between Regional Management and Orchid Island
Allowing for the 90-day total investment horizon Regional Management Corp is expected to generate 1.75 times more return on investment than Orchid Island. However, Regional Management is 1.75 times more volatile than Orchid Island Capital. It trades about 0.06 of its potential returns per unit of risk. Orchid Island Capital is currently generating about 0.06 per unit of risk. If you would invest 2,226 in Regional Management Corp on August 27, 2024 and sell it today you would earn a total of 777.00 from holding Regional Management Corp or generate 34.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regional Management Corp vs. Orchid Island Capital
Performance |
| Timeline |
| Regional Management Corp |
| Orchid Island Capital |
Regional Management and Orchid Island Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regional Management and Orchid Island
The main advantage of trading using opposite Regional Management and Orchid Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Management 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.| Regional Management vs. SLM Corp Pb | Regional Management vs. FirstCash | Regional Management vs. Navient Corp | Regional Management vs. Orix Corp Ads |
| Orchid Island vs. AGNC Investment Corp | Orchid Island vs. Two Harbors Investments | Orchid Island vs. Invesco Mortgage Capital | Orchid Island vs. Chimera Investment |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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