Correlation Between Dynex Capital and Nexpoint Real

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

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

Diversification Opportunities for Dynex Capital and Nexpoint Real

0.95

Correlation Coefficient

Dynex Capital  Nexpoint Real

Almost no diversification

The 3 months correlation between Dynex and Nexpoint is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Nexpoint Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Real Estate 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 Nexpoint Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexpoint Real Estate has no effect on the direction of Dynex Capital i.e., Dynex Capital and Nexpoint Real go up and down completely randomly.

Pair Corralation between Dynex Capital and Nexpoint Real

Allowing for the 90-day total investment horizon Dynex Capital is expected to under-perform the Nexpoint Real. But the stock apears to be less risky and, when comparing its historical volatility, Dynex Capital is 1.2 times less risky than Nexpoint Real. The stock trades about -0.03 of its potential returns per unit of risk. The Nexpoint Real Estate is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,500  in Nexpoint Real Estate on February 3, 2025 and sell it today you would lose (44.00) from holding Nexpoint Real Estate or give up 2.93% of portfolio value over 90 days.

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

Dynex Capital  vs.  Nexpoint Real Estate

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.

Nexpoint Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nexpoint Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Nexpoint Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dynex Capital and Nexpoint Real

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

The idea behind Dynex Capital and Nexpoint Real Estate 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.