Correlation Between KKR Real and Orchid Island

Can any of the company-specific risk be diversified away by investing in both KKR Real 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 KKR Real and Orchid Island into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KKR Real Estate and Orchid Island Capital, you can compare the effects of market volatilities on KKR Real 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 KKR Real with a short position of Orchid Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of KKR Real and Orchid Island.

Diversification Opportunities for KKR Real and Orchid Island

-0.29

Correlation Coefficient

KKR Real  Orchid Island

Very good diversification

The 3 months correlation between KKR and Orchid is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding KKR Real Estate 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 KKR Real 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 KKR Real Estate 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 KKR Real i.e., KKR Real and Orchid Island go up and down completely randomly.

Pair Corralation between KKR Real and Orchid Island

Given the investment horizon of 90 days KKR Real Estate is expected to under-perform the Orchid Island. In addition to that, KKR Real is 1.18 times more volatile than Orchid Island Capital. It trades about 0.0 of its total potential returns per unit of risk. Orchid Island Capital is currently generating about 0.01 per unit of volatility. If you would invest  781.00  in Orchid Island Capital on September 27, 2024 and sell it today you would earn a total of  6.00  from holding Orchid Island Capital or generate 0.77% return on investment over 90 days.

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

KKR Real Estate  vs.  Orchid Island Capital

KKR Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KKR Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock'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 company stockholders.

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KKR Real and Orchid Island

The main advantage of trading using opposite KKR Real and Orchid Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KKR Real 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.

The idea behind KKR Real Estate and Orchid Island Capital 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.