Correlation Between Orchid Island and ACRES Commercial

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

Diversification Opportunities for Orchid Island and ACRES Commercial

-0.49

Correlation Coefficient

Orchid Island  ACRES Commercial

Very good diversification

The 3 months correlation between Orchid and ACRES is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and ACRES Commercial Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACRES Commercial Realty 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 ACRES Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACRES Commercial Realty has no effect on the direction of Orchid Island i.e., Orchid Island and ACRES Commercial go up and down completely randomly.

Pair Corralation between Orchid Island and ACRES Commercial

Considering the 90-day investment horizon Orchid Island Capital is expected to under-perform the ACRES Commercial. In addition to that, Orchid Island is 1.62 times more volatile than ACRES Commercial Realty. It trades about -0.02 of its total potential returns per unit of risk. ACRES Commercial Realty is currently generating about 0.0 per unit of volatility. If you would invest  2,282  in ACRES Commercial Realty on September 2, 2024 and sell it today you would lose (2.00) from holding ACRES Commercial Realty or give up 0.09% of portfolio value over 90 days.

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

Orchid Island Capital  vs.  ACRES Commercial Realty

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.

ACRES Commercial Realty

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Orchid Island and ACRES Commercial

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

The idea behind Orchid Island Capital and ACRES Commercial Realty 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.

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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.