Correlation Between InterRent Real and Nexpoint Residential

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

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

Diversification Opportunities for InterRent Real and Nexpoint Residential

0.7

Correlation Coefficient

InterRent Real  Nexpoint Residential

Poor diversification

The 3 months correlation between InterRent and Nexpoint is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding InterRent Real Estate and Nexpoint Residential Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Residential and InterRent Real 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 InterRent Real Estate 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 InterRent Real i.e., InterRent Real and Nexpoint Residential go up and down completely randomly.

Pair Corralation between InterRent Real and Nexpoint Residential

Assuming the 90 days horizon InterRent Real Estate is expected to generate 1.22 times more return on investment than Nexpoint Residential. However, InterRent Real is 1.22 times more volatile than Nexpoint Residential Trust. It trades about 0.11 of its potential returns per unit of risk. Nexpoint Residential Trust is currently generating about -0.09 per unit of risk. If you would invest  711.00  in InterRent Real Estate on December 22, 2024 and sell it today you would earn a total of  57.00  from holding InterRent Real Estate or generate 8.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	66.67%
Values	Daily Returns

InterRent Real Estate  vs.  Nexpoint Residential Trust

InterRent Real Estate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in InterRent Real Estate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, InterRent Real reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with InterRent Real and Nexpoint Residential

The main advantage of trading using opposite InterRent Real and Nexpoint Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterRent Real 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 InterRent Real Estate 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.