Correlation Between Dynex Capital and NexPoint Real

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

Diversification Opportunities for Dynex Capital and NexPoint Real

0.84

Correlation Coefficient

Dynex Capital  NexPoint Real

Very poor diversification

The 3 months correlation between Dynex and NexPoint is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and NexPoint Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexPoint 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 NexPoint Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexPoint Real Estate has no effect on the direction of Dynex Capital i.e., Dynex Capital and NexPoint Real go up and down completely randomly.

Pair Corralation between Dynex Capital and NexPoint Real

Assuming the 90 days horizon Dynex Capital is expected to generate 2.02 times less return on investment than NexPoint Real. But when comparing it to its historical volatility, Dynex Capital is 3.09 times less risky than NexPoint Real. It trades about 0.22 of its potential returns per unit of risk. NexPoint Real Estate is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,177  in NexPoint Real Estate on September 2, 2024 and sell it today you would earn a total of  193.00  from holding NexPoint Real Estate or generate 8.87% return on investment over 90 days.

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

Dynex Capital  vs.  NexPoint Real Estate

Dynex Capital

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 17 (%) 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.

NexPoint Real Estate

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NexPoint Real Estate are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, NexPoint Real may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dynex Capital and NexPoint Real

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

The idea behind Dynex Capital and NexPoint 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.