Correlation Between Dynex Capital and Clipper Realty

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

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

Diversification Opportunities for Dynex Capital and Clipper Realty

0.73

Correlation Coefficient

Dynex Capital  Clipper Realty

Poor diversification

The 3 months correlation between Dynex and Clipper is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Clipper Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clipper Realty 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 Clipper Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clipper Realty has no effect on the direction of Dynex Capital i.e., Dynex Capital and Clipper Realty go up and down completely randomly.

Pair Corralation between Dynex Capital and Clipper Realty

Allowing for the 90-day total investment horizon Dynex Capital is expected to under-perform the Clipper Realty. But the stock apears to be less risky and, when comparing its historical volatility, Dynex Capital is 2.46 times less risky than Clipper Realty. The stock trades about -0.03 of its potential returns per unit of risk. The Clipper Realty is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  392.00  in Clipper Realty on February 3, 2025 and sell it today you would lose (16.00) from holding Clipper Realty or give up 4.08% of portfolio value over 90 days.

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

Dynex Capital  vs.  Clipper Realty

Dynex Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dynex Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dynex Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Clipper Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clipper Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Clipper Realty is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dynex Capital and Clipper Realty

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

The idea behind Dynex Capital and Clipper Realty 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.