Correlation Between Dynex Capital and Real Estate

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

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

Diversification Opportunities for Dynex Capital and Real Estate

-0.61

Correlation Coefficient

Dynex Capital  Real Estate

Excellent diversification

The 3 months correlation between Dynex and Real is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of Dynex Capital i.e., Dynex Capital and Real Estate go up and down completely randomly.

Pair Corralation between Dynex Capital and Real Estate

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 2.43 times less return on investment than Real Estate. In addition to that, Dynex Capital is 1.49 times more volatile than Real Estate Securities. It trades about 0.17 of its total potential returns per unit of risk. Real Estate Securities is currently generating about 0.6 per unit of volatility. If you would invest  2,950  in Real Estate Securities on September 19, 2024 and sell it today you would earn a total of  45.00  from holding Real Estate Securities or generate 1.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	33.33%
Values	Daily Returns

Dynex Capital  vs.  Real Estate Securities

Dynex Capital

Risk-Adjusted Performance

0 of 100

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.

Real Estate Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Estate Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Real Estate is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dynex Capital and Real Estate

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

The idea behind Dynex Capital and Real Estate Securities 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..