Correlation Between Annaly Capital and Dynex Capital

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

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

Diversification Opportunities for Annaly Capital and Dynex Capital

0.96

Correlation Coefficient

Annaly Capital  Dynex Capital

Almost no diversification

The 3 months correlation between Annaly and Dynex is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management and Dynex Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynex Capital and Annaly 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 Annaly Capital Management are associated (or correlated) with Dynex Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynex Capital has no effect on the direction of Annaly Capital i.e., Annaly Capital and Dynex Capital go up and down completely randomly.

Pair Corralation between Annaly Capital and Dynex Capital

Considering the 90-day investment horizon Annaly Capital Management is expected to generate 0.98 times more return on investment than Dynex Capital. However, Annaly Capital Management is 1.02 times less risky than Dynex Capital. It trades about 0.06 of its potential returns per unit of risk. Dynex Capital is currently generating about 0.06 per unit of risk. If you would invest  1,650  in Annaly Capital Management on December 2, 2024 and sell it today you would earn a total of  546.00  from holding Annaly Capital Management or generate 33.09% return on investment over 90 days.

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

Annaly Capital Management  vs.  Dynex Capital

Annaly Capital Management

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Annaly Capital Management are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Annaly Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Dynex Capital

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Dynex Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Annaly Capital and Dynex Capital

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

The idea behind Annaly Capital Management and Dynex 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.