Correlation Between Dynex Capital and NHPBP

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

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

Diversification Opportunities for Dynex Capital and NHPBP

-0.43

Correlation Coefficient

Dynex Capital  NHPBP

Very good diversification

The 3 months correlation between Dynex and NHPBP is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and NHPBP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NHPBP 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 NHPBP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NHPBP has no effect on the direction of Dynex Capital i.e., Dynex Capital and NHPBP go up and down completely randomly.

Pair Corralation between Dynex Capital and NHPBP

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 0.65 times more return on investment than NHPBP. However, Dynex Capital is 1.53 times less risky than NHPBP. It trades about 0.02 of its potential returns per unit of risk. NHPBP is currently generating about 0.0 per unit of risk. If you would invest  1,117  in Dynex Capital on October 10, 2024 and sell it today you would earn a total of  139.00  from holding Dynex Capital or generate 12.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Dynex Capital  vs.  NHPBP

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.

NHPBP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NHPBP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, NHPBP is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dynex Capital and NHPBP

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

The idea behind Dynex Capital and NHPBP 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.