Correlation Between Dow Jones and Dynex Capital
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Dynex Capital 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 Dow Jones and Dynex Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Dynex Capital, you can compare the effects of market volatilities on Dow Jones and Dynex Capital 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 Dow Jones with a short position of Dynex Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Dynex Capital.
Diversification Opportunities for Dow Jones and Dynex Capital
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and Dynex is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Dynex Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynex Capital and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Dynex Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynex Capital has no effect on the direction of Dow Jones i.e., Dow Jones and Dynex Capital go up and down completely randomly.
Pair Corralation between Dow Jones and Dynex Capital
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.48 times more return on investment than Dynex Capital. However, Dow Jones Industrial is 2.1 times less risky than Dynex Capital. It trades about 0.08 of its potential returns per unit of risk. Dynex Capital is currently generating about 0.04 per unit of risk. If you would invest 3,394,710 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 1,034,941 from holding Dow Jones Industrial or generate 30.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Dynex Capital
Performance |
| Timeline |
Dow Jones and Dynex Capital Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Dynex Capital
Pair trading matchups for Dynex Capital
Pair Trading with Dow Jones and Dynex Capital
The main advantage of trading using opposite Dow Jones and Dynex Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Dynex Capital 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 Dynex Capital will offset losses from the drop in Dynex Capital's long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| Dynex Capital vs. Ellington Residential Mortgage | Dynex Capital vs. Orchid Island Capital | Dynex Capital vs. ARMOUR Residential REIT | Dynex Capital vs. Ellington Financial |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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