Correlation Between Dynex Capital and Visa

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

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

Diversification Opportunities for Dynex Capital and Visa

0.48

Correlation Coefficient

Dynex Capital  Visa

Very weak diversification

The 3 months correlation between Dynex and Visa is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dynex Capital and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Dynex Capital i.e., Dynex Capital and Visa go up and down completely randomly.

Pair Corralation between Dynex Capital and Visa

Allowing for the 90-day total investment horizon Dynex Capital is expected to under-perform the Visa. But the stock apears to be less risky and, when comparing its historical volatility, Dynex Capital is 1.39 times less risky than Visa. The stock trades about -0.02 of its potential returns per unit of risk. The Visa Class A is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  28,422  in Visa Class A on August 21, 2024 and sell it today you would earn a total of  2,794  from holding Visa Class A or generate 9.83% 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.  Visa Class A

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.

Visa Class A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dynex Capital and Visa

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

The idea behind Dynex Capital and Visa Class A 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 CEOs Directory module to screen CEOs from public companies around the world.