Correlation Between AvalonBay Communities and Dynex Capital
Can any of the company-specific risk be diversified away by investing in both AvalonBay Communities 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 AvalonBay Communities and Dynex Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AvalonBay Communities and Dynex Capital, you can compare the effects of market volatilities on AvalonBay Communities 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 AvalonBay Communities with a short position of Dynex Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of AvalonBay Communities and Dynex Capital.
Diversification Opportunities for AvalonBay Communities and Dynex Capital
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between AvalonBay and Dynex is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and Dynex Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynex Capital and AvalonBay Communities 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 AvalonBay Communities 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 AvalonBay Communities i.e., AvalonBay Communities and Dynex Capital go up and down completely randomly.
Pair Corralation between AvalonBay Communities and Dynex Capital
Considering the 90-day investment horizon AvalonBay Communities is expected to generate 1.04 times more return on investment than Dynex Capital. However, AvalonBay Communities is 1.04 times more volatile than Dynex Capital. It trades about 0.01 of its potential returns per unit of risk. Dynex Capital is currently generating about -0.24 per unit of risk. If you would invest 18,195 in AvalonBay Communities on January 20, 2024 and sell it today you would earn a total of 7.00 from holding AvalonBay Communities or generate 0.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
AvalonBay Communities vs. Dynex Capital
Performance |
| Timeline |
| AvalonBay Communities |
| Dynex Capital |
AvalonBay Communities and Dynex Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AvalonBay Communities and Dynex Capital
The main advantage of trading using opposite AvalonBay Communities and Dynex Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvalonBay Communities 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.| AvalonBay Communities vs. Essex Property Trust | AvalonBay Communities vs. UDR Inc | AvalonBay Communities vs. Mid America Apartment Communities | AvalonBay Communities vs. Camden Property Trust |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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