Correlation Between Dynex Capital and Brookfield Corp

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

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

Diversification Opportunities for Dynex Capital and Brookfield Corp

0.46

Correlation Coefficient

Dynex Capital  Brookfield Corp

Very weak diversification

The 3 months correlation between Dynex and Brookfield is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Brookfield Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Corp 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 Brookfield Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Corp has no effect on the direction of Dynex Capital i.e., Dynex Capital and Brookfield Corp go up and down completely randomly.

Pair Corralation between Dynex Capital and Brookfield Corp

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 2.43 times less return on investment than Brookfield Corp. But when comparing it to its historical volatility, Dynex Capital is 1.86 times less risky than Brookfield Corp. It trades about 0.03 of its potential returns per unit of risk. Brookfield Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,539  in Brookfield Corp on August 21, 2024 and sell it today you would earn a total of  72.00  from holding Brookfield Corp or generate 1.3% return on investment over 90 days.

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

Dynex Capital  vs.  Brookfield Corp

Dynex Capital

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dynex Capital are ranked lower than 5 (%) 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.

Brookfield Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Brookfield Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dynex Capital and Brookfield Corp

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

The idea behind Dynex Capital and Brookfield Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.