Correlation Between Chimera Investment and Dynex Capital

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

By analyzing existing cross correlation between Chimera Investment and Dynex Capital, you can compare the effects of market volatilities on Chimera Investment 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 Chimera Investment with a short position of Dynex Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chimera Investment and Dynex Capital.

Diversification Opportunities for Chimera Investment and Dynex Capital

0.21

Correlation Coefficient

Chimera Investment  Dynex Capital

Modest diversification

The 3 months correlation between Chimera and Dynex is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Chimera Investment and Dynex Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynex Capital and Chimera Investment 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 Chimera 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 Chimera Investment i.e., Chimera Investment and Dynex Capital go up and down completely randomly.

Pair Corralation between Chimera Investment and Dynex Capital

Assuming the 90 days trading horizon Chimera Investment is expected to under-perform the Dynex Capital. But the preferred stock apears to be less risky and, when comparing its historical volatility, Chimera Investment is 1.27 times less risky than Dynex Capital. The preferred stock trades about -0.08 of its potential returns per unit of risk. The Dynex Capital is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,511  in Dynex Capital on December 29, 2024 and sell it today you would earn a total of  42.00  from holding Dynex Capital or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Chimera Investment  vs.  Dynex Capital

Chimera Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chimera Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Chimera Investment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Dynex Capital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Dynex Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Chimera Investment and Dynex Capital

The main advantage of trading using opposite Chimera Investment and Dynex Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chimera Investment 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.

The idea behind Chimera Investment and Dynex Capital 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.