Correlation Between Clipper Realty and Nexpoint Residential

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

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

Diversification Opportunities for Clipper Realty and Nexpoint Residential

0.67

Correlation Coefficient

Clipper Realty  Nexpoint Residential

Poor diversification

The 3 months correlation between Clipper and Nexpoint is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Clipper Realty and Nexpoint Residential Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Residential and Clipper Realty 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 Clipper Realty 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 Clipper Realty i.e., Clipper Realty and Nexpoint Residential go up and down completely randomly.

Pair Corralation between Clipper Realty and Nexpoint Residential

Given the investment horizon of 90 days Clipper Realty is expected to under-perform the Nexpoint Residential. In addition to that, Clipper Realty is 2.74 times more volatile than Nexpoint Residential Trust. It trades about -0.04 of its total potential returns per unit of risk. Nexpoint Residential Trust is currently generating about -0.04 per unit of volatility. If you would invest  4,080  in Nexpoint Residential Trust on December 29, 2024 and sell it today you would lose (172.00) from holding Nexpoint Residential Trust or give up 4.22% of portfolio value over 90 days.

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

Clipper Realty  vs.  Nexpoint Residential Trust

Clipper Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clipper Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain 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.

Nexpoint Residential

Risk-Adjusted Performance

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 comparatively stable basic indicators, Nexpoint Residential is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Clipper Realty and Nexpoint Residential

The main advantage of trading using opposite Clipper Realty and Nexpoint Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clipper Realty 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 Clipper Realty 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.