Correlation Between Two Harbors and Dynex Capital
Can any of the company-specific risk be diversified away by investing in both Two Harbors 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 Two Harbors and Dynex Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Two Harbors Investment and Dynex Capital, you can compare the effects of market volatilities on Two Harbors 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 Two Harbors with a short position of Dynex Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and Dynex Capital.
Diversification Opportunities for Two Harbors and Dynex Capital
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Two and Dynex is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investment and Dynex Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynex Capital and Two Harbors 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 Two Harbors Investment 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 Two Harbors i.e., Two Harbors and Dynex Capital go up and down completely randomly.
Pair Corralation between Two Harbors and Dynex Capital
Assuming the 90 days trading horizon Two Harbors Investment is expected to under-perform the Dynex Capital. In addition to that, Two Harbors is 1.77 times more volatile than Dynex Capital. It trades about -0.43 of its total potential returns per unit of risk. Dynex Capital is currently generating about 0.02 per unit of volatility. If you would invest 2,533 in Dynex Capital on August 25, 2024 and sell it today you would earn a total of 3.00 from holding Dynex Capital or generate 0.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Two Harbors Investment vs. Dynex Capital
Performance |
| Timeline |
| Two Harbors Investment |
| Dynex Capital |
Two Harbors and Dynex Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Two Harbors and Dynex Capital
The main advantage of trading using opposite Two Harbors and Dynex Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Two Harbors 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.| Two Harbors vs. Two Harbors Investment | Two Harbors vs. Invesco Mortgage Capital | Two Harbors vs. Chimera Investment | Two Harbors vs. MFA Financial |
| Dynex Capital vs. ARMOUR Residential REIT | Dynex Capital vs. Annaly Capital Management | Dynex Capital vs. AGNC Investment Corp | Dynex Capital vs. Two Harbors Investment |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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