Correlation Between Nexpoint Real and Capital Income

Can any of the company-specific risk be diversified away by investing in both Nexpoint Real and Capital Income 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 Capital Income 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 Capital Income Builder, you can compare the effects of market volatilities on Nexpoint Real and Capital Income 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 Capital Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexpoint Real and Capital Income.

Diversification Opportunities for Nexpoint Real and Capital Income

0.19

Correlation Coefficient

Nexpoint Real  Capital Income

Average diversification

The 3 months correlation between NexPoint and Capital is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Real Estate and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder 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 Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of Nexpoint Real i.e., Nexpoint Real and Capital Income go up and down completely randomly.

Pair Corralation between Nexpoint Real and Capital Income

Assuming the 90 days horizon Nexpoint Real Estate is expected to generate 0.22 times more return on investment than Capital Income. However, Nexpoint Real Estate is 4.58 times less risky than Capital Income. It trades about -0.23 of its potential returns per unit of risk. Capital Income Builder is currently generating about -0.25 per unit of risk. If you would invest  1,649  in Nexpoint Real Estate on October 6, 2024 and sell it today you would lose (18.00) from holding Nexpoint Real Estate or give up 1.09% of portfolio value over 90 days.

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

Nexpoint Real Estate  vs.  Capital Income Builder

Nexpoint Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexpoint Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Nexpoint Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Capital Income Builder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Income Builder has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Capital Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nexpoint Real and Capital Income

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

The idea behind Nexpoint Real Estate and Capital Income Builder 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.