Correlation Between Orchid Island and Korea Closed

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

Diversification Opportunities for Orchid Island and Korea Closed

0.08

Correlation Coefficient

Orchid Island  Korea Closed

Significant diversification

The 3 months correlation between Orchid and Korea is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Orchid Island Capital and Korea Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Closed 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 Korea Closed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Closed has no effect on the direction of Orchid Island i.e., Orchid Island and Korea Closed go up and down completely randomly.

Pair Corralation between Orchid Island and Korea Closed

Considering the 90-day investment horizon Orchid Island Capital is expected to generate 1.31 times more return on investment than Korea Closed. However, Orchid Island is 1.31 times more volatile than Korea Closed. It trades about 0.02 of its potential returns per unit of risk. Korea Closed is currently generating about -0.02 per unit of risk. If you would invest  748.00  in Orchid Island Capital on September 12, 2024 and sell it today you would earn a total of  56.00  from holding Orchid Island Capital or generate 7.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.7%
Values	Daily Returns

Orchid Island Capital  vs.  Korea Closed

Orchid Island Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orchid Island Capital are ranked lower than 2 (%) 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.

Korea Closed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Closed has generated negative risk-adjusted returns adding no value to fund investors. Despite unsteady performance in the last few months, the Fund's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the mutual fund stockholders.

Pair Trading with Orchid Island and Korea Closed

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

The idea behind Orchid Island Capital and Korea Closed 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.