Correlation Between Dynex Capital and Ellington Residential
Can any of the company-specific risk be diversified away by investing in both Dynex Capital and Ellington Residential 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 Ellington Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dynex Capital and Ellington Residential Mortgage, you can compare the effects of market volatilities on Dynex Capital and Ellington Residential 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 Ellington Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynex Capital and Ellington Residential.
Diversification Opportunities for Dynex Capital and Ellington Residential
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dynex and Ellington is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Ellington Residential Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellington Residential 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 Ellington Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellington Residential has no effect on the direction of Dynex Capital i.e., Dynex Capital and Ellington Residential go up and down completely randomly.
Pair Corralation between Dynex Capital and Ellington Residential
Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 0.58 times more return on investment than Ellington Residential. However, Dynex Capital is 1.71 times less risky than Ellington Residential. It trades about 0.03 of its potential returns per unit of risk. Ellington Residential Mortgage is currently generating about -0.16 per unit of risk. If you would invest 1,234 in Dynex Capital on August 23, 2024 and sell it today you would earn a total of 7.00 from holding Dynex Capital or generate 0.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dynex Capital vs. Ellington Residential Mortgage
Performance |
| Timeline |
| Dynex Capital |
| Ellington Residential |
Dynex Capital and Ellington Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dynex Capital and Ellington Residential
The main advantage of trading using opposite Dynex Capital and Ellington Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynex Capital position performs unexpectedly, Ellington Residential 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 Ellington Residential will offset losses from the drop in Ellington Residential'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 |
| Ellington Residential vs. Dynex Capital | Ellington Residential vs. Orchid Island Capital | Ellington Residential vs. ARMOUR Residential REIT | Ellington Residential vs. Ready Capital Corp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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