Correlation Between Nexpoint Real and Low Duration

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

Diversification Opportunities for Nexpoint Real and Low Duration

0.72

Correlation Coefficient

Nexpoint Real  Low Duration

Poor diversification

The 3 months correlation between Nexpoint and Low is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Real Estate and Low Duration Bond Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Low Duration Bond 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 Low Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Low Duration Bond has no effect on the direction of Nexpoint Real i.e., Nexpoint Real and Low Duration go up and down completely randomly.

Pair Corralation between Nexpoint Real and Low Duration

Assuming the 90 days horizon Nexpoint Real Estate is expected to under-perform the Low Duration. In addition to that, Nexpoint Real is 5.5 times more volatile than Low Duration Bond Investor. It trades about -0.04 of its total potential returns per unit of risk. Low Duration Bond Investor is currently generating about 0.17 per unit of volatility. If you would invest  1,274  in Low Duration Bond Investor on October 26, 2024 and sell it today you would earn a total of  11.00  from holding Low Duration Bond Investor or generate 0.86% 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.  Low Duration Bond Investor

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.

Low Duration Bond

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Low Duration Bond Investor are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Low Duration 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 Low Duration

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

The idea behind Nexpoint Real Estate and Low Duration Bond Investor 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.