Correlation Between Dynex Capital and BlackRock Utility

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

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

Diversification Opportunities for Dynex Capital and BlackRock Utility

-0.22

Correlation Coefficient

Dynex Capital  BlackRock Utility

Very good diversification

The 3 months correlation between Dynex and BlackRock is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and BlackRock Utility Infrastructu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Utility 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 BlackRock Utility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Utility has no effect on the direction of Dynex Capital i.e., Dynex Capital and BlackRock Utility go up and down completely randomly.

Pair Corralation between Dynex Capital and BlackRock Utility

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 0.97 times more return on investment than BlackRock Utility. However, Dynex Capital is 1.03 times less risky than BlackRock Utility. It trades about 0.37 of its potential returns per unit of risk. BlackRock Utility Infrastructure is currently generating about -0.1 per unit of risk. If you would invest  1,232  in Dynex Capital on December 5, 2024 and sell it today you would earn a total of  165.00  from holding Dynex Capital or generate 13.39% return on investment over 90 days.

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

Dynex Capital  vs.  BlackRock Utility Infrastructu

Dynex Capital

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 22 (%) 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.

BlackRock Utility

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock Utility Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, BlackRock Utility is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Dynex Capital and BlackRock Utility

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

The idea behind Dynex Capital and BlackRock Utility Infrastructure 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.