Correlation Between Dynex Capital and Nabors Energy

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

By analyzing existing cross correlation between Dynex Capital and Nabors Energy Transition, you can compare the effects of market volatilities on Dynex Capital and Nabors Energy 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 Nabors Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynex Capital and Nabors Energy.

Diversification Opportunities for Dynex Capital and Nabors Energy

0.45

Correlation Coefficient

Dynex Capital  Nabors Energy

Very weak diversification

The 3 months correlation between Dynex and Nabors is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Nabors Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Energy Transition 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 Nabors Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Energy Transition has no effect on the direction of Dynex Capital i.e., Dynex Capital and Nabors Energy go up and down completely randomly.

Pair Corralation between Dynex Capital and Nabors Energy

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 4.94 times more return on investment than Nabors Energy. However, Dynex Capital is 4.94 times more volatile than Nabors Energy Transition. It trades about 0.11 of its potential returns per unit of risk. Nabors Energy Transition is currently generating about 0.16 per unit of risk. If you would invest  1,113  in Dynex Capital on October 1, 2024 and sell it today you would earn a total of  144.00  from holding Dynex Capital or generate 12.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Dynex Capital  vs.  Nabors Energy Transition

Dynex Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Nabors Energy Transition

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Energy Transition are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Nabors Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dynex Capital and Nabors Energy

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

The idea behind Dynex Capital and Nabors Energy Transition 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.