Correlation Between Modiv and NexPoint Strategic

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

By analyzing existing cross correlation between Modiv Inc and NexPoint Strategic Opportunities, you can compare the effects of market volatilities on Modiv and NexPoint Strategic 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 Modiv with a short position of NexPoint Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modiv and NexPoint Strategic.

Diversification Opportunities for Modiv and NexPoint Strategic

-0.15

Correlation Coefficient

Modiv  NexPoint Strategic

Good diversification

The 3 months correlation between Modiv and NexPoint is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Modiv Inc and NexPoint Strategic Opportuniti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexPoint Strategic and Modiv 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 Modiv Inc are associated (or correlated) with NexPoint Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexPoint Strategic has no effect on the direction of Modiv i.e., Modiv and NexPoint Strategic go up and down completely randomly.

Pair Corralation between Modiv and NexPoint Strategic

Considering the 90-day investment horizon Modiv Inc is expected to generate 0.76 times more return on investment than NexPoint Strategic. However, Modiv Inc is 1.31 times less risky than NexPoint Strategic. It trades about 0.05 of its potential returns per unit of risk. NexPoint Strategic Opportunities is currently generating about 0.02 per unit of risk. If you would invest  1,533  in Modiv Inc on September 3, 2024 and sell it today you would earn a total of  69.00  from holding Modiv Inc or generate 4.5% return on investment over 90 days.

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

Modiv Inc  vs.  NexPoint Strategic Opportuniti

Modiv Inc

Risk-Adjusted Performance

3 of 100

Insignificant

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

NexPoint Strategic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NexPoint Strategic Opportunities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, NexPoint Strategic is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Modiv and NexPoint Strategic

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

The idea behind Modiv Inc and NexPoint Strategic Opportunities 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.