Correlation Between Apartment Investment and Nexpoint Residential

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

By analyzing existing cross correlation between Apartment Investment and and Nexpoint Residential Trust, you can compare the effects of market volatilities on Apartment Investment and Nexpoint Residential 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 Apartment Investment with a short position of Nexpoint Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apartment Investment and Nexpoint Residential.

Diversification Opportunities for Apartment Investment and Nexpoint Residential

0.23

Correlation Coefficient

Apartment Investment  Nexpoint Residential

Modest diversification

The 3 months correlation between Apartment and Nexpoint is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Apartment Investment and and Nexpoint Residential Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Residential and Apartment Investment 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 Apartment Investment and are associated (or correlated) with Nexpoint Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexpoint Residential has no effect on the direction of Apartment Investment i.e., Apartment Investment and Nexpoint Residential go up and down completely randomly.

Pair Corralation between Apartment Investment and Nexpoint Residential

Considering the 90-day investment horizon Apartment Investment and is expected to generate 1.4 times more return on investment than Nexpoint Residential. However, Apartment Investment is 1.4 times more volatile than Nexpoint Residential Trust. It trades about 0.08 of its potential returns per unit of risk. Nexpoint Residential Trust is currently generating about -0.49 per unit of risk. If you would invest  862.00  in Apartment Investment and on October 14, 2024 and sell it today you would earn a total of  32.00  from holding Apartment Investment and or generate 3.71% return on investment over 90 days.

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

Apartment Investment and  vs.  Nexpoint Residential Trust

Apartment Investment and

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Apartment Investment and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, Apartment Investment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Nexpoint Residential

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexpoint Residential Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Apartment Investment and Nexpoint Residential

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

The idea behind Apartment Investment and and Nexpoint Residential Trust 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.