Correlation Between Dynex Capital and Thunder Bridge

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

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

Diversification Opportunities for Dynex Capital and Thunder Bridge

0.48

Correlation Coefficient

Dynex Capital  Thunder Bridge

Very weak diversification

The 3 months correlation between Dynex and Thunder is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Thunder Bridge Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunder Bridge Capital 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 Thunder Bridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunder Bridge Capital has no effect on the direction of Dynex Capital i.e., Dynex Capital and Thunder Bridge go up and down completely randomly.

Pair Corralation between Dynex Capital and Thunder Bridge

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 27.43 times less return on investment than Thunder Bridge. But when comparing it to its historical volatility, Dynex Capital is 4.92 times less risky than Thunder Bridge. It trades about 0.02 of its potential returns per unit of risk. Thunder Bridge Capital is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,050  in Thunder Bridge Capital on September 30, 2024 and sell it today you would earn a total of  192.00  from holding Thunder Bridge Capital or generate 18.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.25%
Values	Daily Returns

Dynex Capital  vs.  Thunder Bridge Capital

Dynex Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 1 (%) 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.

Thunder Bridge Capital

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Thunder Bridge Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Thunder Bridge unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dynex Capital and Thunder Bridge

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

The idea behind Dynex Capital and Thunder Bridge Capital 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.