Correlation Between Dynex Capital and MFS High

Can any of the company-specific risk be diversified away by investing in both Dynex Capital and MFS High 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 Dynex Capital and MFS High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dynex Capital and MFS High Income, you can compare the effects of market volatilities on Dynex Capital and MFS High 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 Dynex Capital with a short position of MFS High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynex Capital and MFS High.

Diversification Opportunities for Dynex Capital and MFS High

-0.16

Correlation Coefficient

Dynex Capital  MFS High

Good diversification

The 3 months correlation between Dynex and MFS is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and MFS High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS High Income and Dynex Capital 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 Dynex Capital are associated (or correlated) with MFS High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS High Income has no effect on the direction of Dynex Capital i.e., Dynex Capital and MFS High go up and down completely randomly.

Pair Corralation between Dynex Capital and MFS High

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 1.26 times more return on investment than MFS High. However, Dynex Capital is 1.26 times more volatile than MFS High Income. It trades about -0.02 of its potential returns per unit of risk. MFS High Income is currently generating about -0.09 per unit of risk. If you would invest  1,254  in Dynex Capital on September 19, 2024 and sell it today you would lose (19.00) from holding Dynex Capital or give up 1.52% of portfolio value over 90 days.

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

Dynex Capital  vs.  MFS High Income

Dynex Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dynex Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dynex Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

MFS High Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dynex Capital and MFS High

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

The idea behind Dynex Capital and MFS High Income 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.