Correlation Between Dynex Capital and Power REIT

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

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

Diversification Opportunities for Dynex Capital and Power REIT

-0.58

Correlation Coefficient

Dynex Capital  Power REIT

Excellent diversification

The 3 months correlation between Dynex and Power is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Power REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power REIT 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 Power REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power REIT has no effect on the direction of Dynex Capital i.e., Dynex Capital and Power REIT go up and down completely randomly.

Pair Corralation between Dynex Capital and Power REIT

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 0.21 times more return on investment than Power REIT. However, Dynex Capital is 4.7 times less risky than Power REIT. It trades about 0.17 of its potential returns per unit of risk. Power REIT is currently generating about -0.03 per unit of risk. If you would invest  1,200  in Dynex Capital on December 26, 2024 and sell it today you would earn a total of  136.00  from holding Dynex Capital or generate 11.33% 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.  Power REIT

Dynex Capital

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 13 (%) 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 April 2025.

Power REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Dynex Capital and Power REIT

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

The idea behind Dynex Capital and Power REIT 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..