Correlation Between Plum Acquisition and Dynex Capital

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

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

Diversification Opportunities for Plum Acquisition and Dynex Capital

0.49

Correlation Coefficient

Plum Acquisition  Dynex Capital

Very weak diversification

The 3 months correlation between Plum and Dynex is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Plum Acquisition Corp and Dynex Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynex Capital and Plum Acquisition 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 Plum Acquisition Corp 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 Plum Acquisition i.e., Plum Acquisition and Dynex Capital go up and down completely randomly.

Pair Corralation between Plum Acquisition and Dynex Capital

Given the investment horizon of 90 days Plum Acquisition is expected to generate 1.16 times less return on investment than Dynex Capital. But when comparing it to its historical volatility, Plum Acquisition Corp is 3.57 times less risky than Dynex Capital. It trades about 0.14 of its potential returns per unit of risk. Dynex Capital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,237  in Dynex Capital on September 17, 2024 and sell it today you would earn a total of  30.00  from holding Dynex Capital or generate 2.43% return on investment over 90 days.

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

Plum Acquisition Corp  vs.  Dynex Capital

Plum Acquisition Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady primary indicators, Plum Acquisition is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Dynex Capital

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 3 (%) 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Plum Acquisition and Dynex Capital

The main advantage of trading using opposite Plum Acquisition and Dynex Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plum Acquisition 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 Plum Acquisition Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.