Correlation Between Nexpoint Real and Ladder Capital

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

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

Diversification Opportunities for Nexpoint Real and Ladder Capital

0.61

Correlation Coefficient

Nexpoint Real  Ladder Capital

Poor diversification

The 3 months correlation between Nexpoint and Ladder is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Real Estate and Ladder Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ladder Capital Corp and Nexpoint 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 Nexpoint Real Estate are associated (or correlated) with Ladder Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ladder Capital Corp has no effect on the direction of Nexpoint Real i.e., Nexpoint Real and Ladder Capital go up and down completely randomly.

Pair Corralation between Nexpoint Real and Ladder Capital

Given the investment horizon of 90 days Nexpoint Real Estate is expected to generate 1.92 times more return on investment than Ladder Capital. However, Nexpoint Real is 1.92 times more volatile than Ladder Capital Corp. It trades about 0.11 of its potential returns per unit of risk. Ladder Capital Corp is currently generating about 0.02 per unit of risk. If you would invest  1,531  in Nexpoint Real Estate on September 4, 2024 and sell it today you would earn a total of  226.00  from holding Nexpoint Real Estate or generate 14.76% return on investment over 90 days.

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

Nexpoint Real Estate  vs.  Ladder Capital Corp

Nexpoint Real Estate

Risk-Adjusted Performance

8 of 100

OK

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

Ladder Capital Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ladder Capital Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Ladder Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Nexpoint Real and Ladder Capital

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

The idea behind Nexpoint Real Estate and Ladder Capital Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.