Correlation Between American Homes and Dynex Capital
Can any of the company-specific risk be diversified away by investing in both American Homes 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 American Homes and Dynex Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Homes 4 and Dynex Capital, you can compare the effects of market volatilities on American Homes 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 American Homes with a short position of Dynex Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Dynex Capital.
Diversification Opportunities for American Homes and Dynex Capital
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Dynex is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Dynex Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynex Capital and American Homes 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 American Homes 4 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 American Homes i.e., American Homes and Dynex Capital go up and down completely randomly.
Pair Corralation between American Homes and Dynex Capital
Considering the 90-day investment horizon American Homes 4 is expected to generate 0.84 times more return on investment than Dynex Capital. However, American Homes 4 is 1.2 times less risky than Dynex Capital. It trades about 0.01 of its potential returns per unit of risk. Dynex Capital is currently generating about 0.0 per unit of risk. If you would invest 3,563 in American Homes 4 on January 26, 2024 and sell it today you would lose (6.00) from holding American Homes 4 or give up 0.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Homes 4 vs. Dynex Capital
Performance |
| Timeline |
| American Homes 4 |
| Dynex Capital |
American Homes and Dynex Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Dynex Capital
The main advantage of trading using opposite American Homes and Dynex Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes 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.| American Homes vs. Sun Communities | American Homes vs. Clipper Realty | American Homes vs. UDR Inc | American Homes vs. UMH Properties |
Check out your portfolio center.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.
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