Correlation Between Western Asset and Orchid Island
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Orchid Island into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Mortgage and Orchid Island Capital, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Orchid Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Orchid Island.
Diversification Opportunities for Western Asset and Orchid Island
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Orchid is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage 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 Western Asset 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 Western Asset Mortgage 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 Western Asset i.e., Western Asset and Orchid Island go up and down completely randomly.
Pair Corralation between Western Asset and Orchid Island
If you would invest 769.00 in Orchid Island Capital on August 27, 2024 and sell it today you would earn a total of 24.00 from holding Orchid Island Capital or generate 3.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Western Asset Mortgage vs. Orchid Island Capital
Performance |
| Timeline |
| Western Asset Mortgage |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Orchid Island Capital |
Western Asset and Orchid Island Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Orchid Island
The main advantage of trading using opposite Western Asset and Orchid Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Granite Point Mortgage | Western Asset vs. Invesco Mortgage Capital | Western Asset vs. Ellington Residential Mortgage | Western Asset vs. Chimera Investment |
| 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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