Correlation Between Dynex Capital and National Retail

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

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

Diversification Opportunities for Dynex Capital and National Retail

-0.52

Correlation Coefficient

Dynex Capital  National Retail

Excellent diversification

The 3 months correlation between Dynex and National is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and National Retail Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Retail Prop 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 National Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Retail Prop has no effect on the direction of Dynex Capital i.e., Dynex Capital and National Retail go up and down completely randomly.

Pair Corralation between Dynex Capital and National Retail

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 0.62 times more return on investment than National Retail. However, Dynex Capital is 1.61 times less risky than National Retail. It trades about 0.1 of its potential returns per unit of risk. National Retail Properties is currently generating about -0.21 per unit of risk. If you would invest  1,217  in Dynex Capital on October 23, 2024 and sell it today you would earn a total of  58.00  from holding Dynex Capital or generate 4.77% return on investment over 90 days.

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

Dynex Capital  vs.  National Retail Properties

Dynex Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 7 (%) 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.

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dynex Capital and National Retail

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

The idea behind Dynex Capital and National Retail Properties 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.