Correlation Between Orchid Island and Blackstone Mortgage

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

Diversification Opportunities for Orchid Island and Blackstone Mortgage

0.57

Correlation Coefficient

Orchid Island  Blackstone Mortgage

Very weak diversification

The 3 months correlation between Orchid and Blackstone is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Blackstone Mortgage Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackstone Mortgage Trust 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 Blackstone Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackstone Mortgage Trust has no effect on the direction of Orchid Island i.e., Orchid Island and Blackstone Mortgage go up and down completely randomly.

Pair Corralation between Orchid Island and Blackstone Mortgage

Considering the 90-day investment horizon Orchid Island is expected to generate 1.52 times less return on investment than Blackstone Mortgage. But when comparing it to its historical volatility, Orchid Island Capital is 1.12 times less risky than Blackstone Mortgage. It trades about 0.01 of its potential returns per unit of risk. Blackstone Mortgage Trust is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,748  in Blackstone Mortgage Trust on September 14, 2024 and sell it today you would earn a total of  180.00  from holding Blackstone Mortgage Trust or generate 10.3% return on investment over 90 days.

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

Orchid Island Capital  vs.  Blackstone Mortgage Trust

Orchid Island Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orchid Island Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Blackstone Mortgage Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blackstone Mortgage Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Blackstone Mortgage is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Orchid Island and Blackstone Mortgage

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

The idea behind Orchid Island Capital and Blackstone Mortgage Trust 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.