Correlation Between Dynex Capital and Barings BDC

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

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

Diversification Opportunities for Dynex Capital and Barings BDC

0.84

Correlation Coefficient

Dynex Capital  Barings BDC

Very poor diversification

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

Pair Corralation between Dynex Capital and Barings BDC

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 0.52 times more return on investment than Barings BDC. However, Dynex Capital is 1.93 times less risky than Barings BDC. It trades about 0.39 of its potential returns per unit of risk. Barings BDC is currently generating about -0.01 per unit of risk. If you would invest  1,307  in Dynex Capital on December 5, 2024 and sell it today you would earn a total of  87.50  from holding Dynex Capital or generate 6.69% 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.  Barings BDC

Dynex Capital

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Dynex Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Barings BDC

Risk-Adjusted Performance

OK

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

Pair Trading with Dynex Capital and Barings BDC

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

The idea behind Dynex Capital and Barings BDC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.