Correlation Between Dynex Capital and Davis Real
Can any of the company-specific risk be diversified away by investing in both Dynex Capital and Davis Real 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 Davis Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dynex Capital and Davis Real Estate, you can compare the effects of market volatilities on Dynex Capital and Davis Real 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 Davis Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynex Capital and Davis Real.
Diversification Opportunities for Dynex Capital and Davis Real
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dynex and Davis is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Davis Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Real Estate 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 Davis Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Real Estate has no effect on the direction of Dynex Capital i.e., Dynex Capital and Davis Real go up and down completely randomly.
Pair Corralation between Dynex Capital and Davis Real
Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 1.25 times more return on investment than Davis Real. However, Dynex Capital is 1.25 times more volatile than Davis Real Estate. It trades about 0.05 of its potential returns per unit of risk. Davis Real Estate is currently generating about 0.05 per unit of risk. If you would invest 991.00 in Dynex Capital on August 31, 2024 and sell it today you would earn a total of 264.00 from holding Dynex Capital or generate 26.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Dynex Capital vs. Davis Real Estate
Performance |
| Timeline |
| Dynex Capital |
| Davis Real Estate |
Dynex Capital and Davis Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dynex Capital and Davis Real
The main advantage of trading using opposite Dynex Capital and Davis Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynex Capital position performs unexpectedly, Davis Real 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 Davis Real will offset losses from the drop in Davis Real's long position.| Dynex Capital vs. Ellington Residential Mortgage | Dynex Capital vs. Orchid Island Capital | Dynex Capital vs. ARMOUR Residential REIT | Dynex Capital vs. Ellington Financial |
| Davis Real vs. Franklin Natural Resources | Davis Real vs. Templeton Developing Markets | Davis Real vs. Franklin Utilities Fund | Davis Real vs. Aquagold International |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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