Correlation Between Dynex Capital and Federal Agricultural

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

By analyzing existing cross correlation between Dynex Capital and Federal Agricultural Mortgage, you can compare the effects of market volatilities on Dynex Capital and Federal Agricultural 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 Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynex Capital and Federal Agricultural.

Diversification Opportunities for Dynex Capital and Federal Agricultural

0.21

Correlation Coefficient

Dynex Capital  Federal Agricultural

Modest diversification

The 3 months correlation between Dynex and Federal is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural 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 Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Dynex Capital i.e., Dynex Capital and Federal Agricultural go up and down completely randomly.

Pair Corralation between Dynex Capital and Federal Agricultural

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 0.3 times more return on investment than Federal Agricultural. However, Dynex Capital is 3.3 times less risky than Federal Agricultural. It trades about 0.06 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about -0.18 per unit of risk. If you would invest  1,235  in Dynex Capital on September 20, 2024 and sell it today you would earn a total of  9.50  from holding Dynex Capital or generate 0.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	63.64%
Values	Daily Returns

Dynex Capital  vs.  Federal Agricultural Mortgage

Dynex Capital

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Dynex Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Federal Agricultural

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Federal Agricultural is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dynex Capital and Federal Agricultural

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

The idea behind Dynex Capital and Federal Agricultural Mortgage 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 Commodity Directory module to find actively traded commodities issued by global exchanges.