Correlation Between Dynex Capital and KKR Real

Can any of the company-specific risk be diversified away by investing in both Dynex Capital and KKR 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 KKR 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 KKR Real Estate, you can compare the effects of market volatilities on Dynex Capital and KKR 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 KKR Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynex Capital and KKR Real.

Diversification Opportunities for Dynex Capital and KKR Real

-0.52

Correlation Coefficient

Dynex Capital  KKR Real

Excellent diversification

The 3 months correlation between Dynex and KKR is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and KKR Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR 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 KKR Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Real Estate has no effect on the direction of Dynex Capital i.e., Dynex Capital and KKR Real go up and down completely randomly.

Pair Corralation between Dynex Capital and KKR Real

Assuming the 90 days horizon Dynex Capital is expected to generate 0.38 times more return on investment than KKR Real. However, Dynex Capital is 2.6 times less risky than KKR Real. It trades about 0.02 of its potential returns per unit of risk. KKR Real Estate is currently generating about -0.28 per unit of risk. If you would invest  2,536  in Dynex Capital on September 23, 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Dynex Capital  vs.  KKR Real Estate

Dynex Capital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 6 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

KKR Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KKR Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dynex Capital and KKR Real

The main advantage of trading using opposite Dynex Capital and KKR Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynex Capital position performs unexpectedly, KKR 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 KKR Real will offset losses from the drop in KKR Real's long position.

The idea behind Dynex Capital and KKR Real Estate 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.