Correlation Between AJX Old and Nexpoint Real

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

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

Diversification Opportunities for AJX Old and Nexpoint Real

-0.17

Correlation Coefficient

AJX Old  Nexpoint Real

Good diversification

The 3 months correlation between AJX and Nexpoint is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding AJX Old 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 AJX Old 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 AJX Old 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 AJX Old i.e., AJX Old and Nexpoint Real go up and down completely randomly.

Pair Corralation between AJX Old and Nexpoint Real

Considering the 90-day investment horizon AJX Old is expected to generate 30.57 times more return on investment than Nexpoint Real. However, AJX Old is 30.57 times more volatile than Nexpoint Real Estate. It trades about 0.06 of its potential returns per unit of risk. Nexpoint Real Estate is currently generating about 0.04 per unit of risk. If you would invest  491.00  in AJX Old on October 7, 2024 and sell it today you would lose (191.00) from holding AJX Old or give up 38.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.53%
Values	Daily Returns

AJX Old  vs.  Nexpoint Real Estate

AJX Old

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days AJX Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady forward-looking indicators, AJX Old showed solid returns over the last few months and may actually be approaching a breakup point.

Nexpoint Real Estate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nexpoint Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Nexpoint Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AJX Old and Nexpoint Real

The main advantage of trading using opposite AJX Old and Nexpoint Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AJX Old 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 AJX Old 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.