Correlation Between Orchid Island and New York

Can any of the company-specific risk be diversified away by investing in both Orchid Island and New York 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 New York 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 New York Mortgage, you can compare the effects of market volatilities on Orchid Island and New York 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 New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orchid Island and New York.

Diversification Opportunities for Orchid Island and New York

-0.15

Correlation Coefficient

Orchid Island  New York

Good diversification

The 3 months correlation between Orchid and New is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and New York Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York Mortgage 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Mortgage has no effect on the direction of Orchid Island i.e., Orchid Island and New York go up and down completely randomly.

Pair Corralation between Orchid Island and New York

Considering the 90-day investment horizon Orchid Island Capital is expected to generate 0.67 times more return on investment than New York. However, Orchid Island Capital is 1.49 times less risky than New York. It trades about 0.01 of its potential returns per unit of risk. New York Mortgage is currently generating about -0.11 per unit of risk. If you would invest  821.00  in Orchid Island Capital on March 14, 2024 and sell it today you would earn a total of  2.00  from holding Orchid Island Capital or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Orchid Island Capital  vs.  New York Mortgage

Orchid Island Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orchid Island Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Orchid Island is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

New York Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New York Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Orchid Island and New York

The main advantage of trading using opposite Orchid Island and New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orchid Island position performs unexpectedly, New York 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 New York will offset losses from the drop in New York's long position.

The idea behind Orchid Island Capital and New York Mortgage pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.