Correlation Between Dynex Capital and New England

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

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

Diversification Opportunities for Dynex Capital and New England

0.37

Correlation Coefficient

Dynex Capital  New England

Weak diversification

The 3 months correlation between Dynex and New is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and New England Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New England Realty 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 New England. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New England Realty has no effect on the direction of Dynex Capital i.e., Dynex Capital and New England go up and down completely randomly.

Pair Corralation between Dynex Capital and New England

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 94.55 times less return on investment than New England. But when comparing it to its historical volatility, Dynex Capital is 37.98 times less risky than New England. It trades about 0.02 of its potential returns per unit of risk. New England Realty is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,753  in New England Realty on October 11, 2024 and sell it today you would earn a total of  1,517  from holding New England Realty or generate 22.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	63.43%
Values	Daily Returns

Dynex Capital  vs.  New England Realty

Dynex Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 9 (%) 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.

New England Realty

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days New England Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain technical and fundamental indicators, New England may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dynex Capital and New England

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

The idea behind Dynex Capital and New England Realty 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 Transaction History module to view history of all your transactions and understand their impact on performance.