Correlation Between Dynex Capital and Forestar

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

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

Diversification Opportunities for Dynex Capital and Forestar

-0.7

Correlation Coefficient

Dynex Capital  Forestar

Excellent diversification

The 3 months correlation between Dynex and Forestar is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Forestar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forestar Group 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 Forestar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forestar Group has no effect on the direction of Dynex Capital i.e., Dynex Capital and Forestar go up and down completely randomly.

Pair Corralation between Dynex Capital and Forestar

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 0.49 times more return on investment than Forestar. However, Dynex Capital is 2.06 times less risky than Forestar. It trades about 0.05 of its potential returns per unit of risk. Forestar Group is currently generating about -0.03 per unit of risk. If you would invest  1,113  in Dynex Capital on October 7, 2024 and sell it today you would earn a total of  154.00  from holding Dynex Capital or generate 13.84% return on investment over 90 days.

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

Dynex Capital  vs.  Forestar Group

Dynex Capital

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Dynex Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Forestar Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forestar Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Dynex Capital and Forestar

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

The idea behind Dynex Capital and Forestar Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.