Correlation Between Xtrackers ShortDAX and Dynex Capital

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

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

Diversification Opportunities for Xtrackers ShortDAX and Dynex Capital

-0.8

Correlation Coefficient

Xtrackers ShortDAX  Dynex Capital

Pay attention - limited upside

The 3 months correlation between Xtrackers and Dynex is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Dynex Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynex Capital and Xtrackers ShortDAX 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 Xtrackers ShortDAX 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 Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Dynex Capital go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Dynex Capital

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Dynex Capital. In addition to that, Xtrackers ShortDAX is 1.07 times more volatile than Dynex Capital. It trades about -0.33 of its total potential returns per unit of risk. Dynex Capital is currently generating about 0.15 per unit of volatility. If you would invest  1,158  in Dynex Capital on October 25, 2024 and sell it today you would earn a total of  77.00  from holding Dynex Capital or generate 6.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Xtrackers ShortDAX  vs.  Dynex Capital

Xtrackers ShortDAX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Dynex Capital

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dynex Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers ShortDAX and Dynex Capital

The main advantage of trading using opposite Xtrackers ShortDAX and Dynex Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers ShortDAX 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 Xtrackers ShortDAX 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.