Correlation Between Dynex Capital and AvalonBay Communities

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Can any of the company-specific risk be diversified away by investing in both Dynex Capital and AvalonBay Communities 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 AvalonBay Communities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dynex Capital and AvalonBay Communities, you can compare the effects of market volatilities on Dynex Capital and AvalonBay Communities 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 AvalonBay Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynex Capital and AvalonBay Communities.

Diversification Opportunities for Dynex Capital and AvalonBay Communities

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Dynex and AvalonBay is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and AvalonBay Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AvalonBay Communities 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 AvalonBay Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AvalonBay Communities has no effect on the direction of Dynex Capital i.e., Dynex Capital and AvalonBay Communities go up and down completely randomly.

Pair Corralation between Dynex Capital and AvalonBay Communities

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 1.26 times more return on investment than AvalonBay Communities. However, Dynex Capital is 1.26 times more volatile than AvalonBay Communities. It trades about 0.02 of its potential returns per unit of risk. AvalonBay Communities is currently generating about 0.03 per unit of risk. If you would invest  1,201  in Dynex Capital on December 29, 2023 and sell it today you would earn a total of  44.00  from holding Dynex Capital or generate 3.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Dynex Capital  vs.  AvalonBay Communities

 Performance 
       Timeline  
Dynex Capital 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.
AvalonBay Communities 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days AvalonBay Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AvalonBay Communities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dynex Capital and AvalonBay Communities Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dynex Capital and AvalonBay Communities

The main advantage of trading using opposite Dynex Capital and AvalonBay Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynex Capital position performs unexpectedly, AvalonBay Communities 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 AvalonBay Communities will offset losses from the drop in AvalonBay Communities' long position.
The idea behind Dynex Capital and AvalonBay Communities 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.
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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