Correlation Between Dynex Capital and Jackson Financial

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

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

Diversification Opportunities for Dynex Capital and Jackson Financial

-0.33

Correlation Coefficient

Dynex Capital  Jackson Financial

Very good diversification

The 3 months correlation between Dynex and Jackson is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Jackson Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jackson Financial 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 Jackson Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jackson Financial has no effect on the direction of Dynex Capital i.e., Dynex Capital and Jackson Financial go up and down completely randomly.

Pair Corralation between Dynex Capital and Jackson Financial

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 4.21 times less return on investment than Jackson Financial. But when comparing it to its historical volatility, Dynex Capital is 1.75 times less risky than Jackson Financial. It trades about 0.03 of its potential returns per unit of risk. Jackson Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,319  in Jackson Financial on October 6, 2024 and sell it today you would earn a total of  4,458  from holding Jackson Financial or generate 103.22% 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.  Jackson Financial

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.

Jackson Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jackson Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Dynex Capital and Jackson Financial

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

The idea behind Dynex Capital and Jackson Financial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.