Correlation Between Dynex Capital and First Industrial

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

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

Diversification Opportunities for Dynex Capital and First Industrial

-0.33

Correlation Coefficient

Dynex Capital  First Industrial

Very good diversification

The 3 months correlation between Dynex and First is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and First Industrial Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Industrial 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 First Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Industrial Realty has no effect on the direction of Dynex Capital i.e., Dynex Capital and First Industrial go up and down completely randomly.

Pair Corralation between Dynex Capital and First Industrial

Allowing for the 90-day total investment horizon Dynex Capital is expected to generate 0.51 times more return on investment than First Industrial. However, Dynex Capital is 1.94 times less risky than First Industrial. It trades about 0.1 of its potential returns per unit of risk. First Industrial Realty is currently generating about -0.2 per unit of risk. If you would invest  1,239  in Dynex Capital on September 23, 2024 and sell it today you would earn a total of  18.00  from holding Dynex Capital or generate 1.45% return on investment over 90 days.

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

Dynex Capital  vs.  First Industrial Realty

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 recent stock price disturbance, may contribute to short-term losses for the investors.

First Industrial Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Industrial Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Dynex Capital and First Industrial

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

The idea behind Dynex Capital and First Industrial 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.