Correlation Between NexPoint Diversified and Armada Hoffler

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

By analyzing existing cross correlation between NexPoint Diversified Real and Armada Hoffler Properties, you can compare the effects of market volatilities on NexPoint Diversified and Armada Hoffler 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 Diversified with a short position of Armada Hoffler. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexPoint Diversified and Armada Hoffler.

Diversification Opportunities for NexPoint Diversified and Armada Hoffler

0.1

Correlation Coefficient

NexPoint Diversified  Armada Hoffler

Average diversification

The 3 months correlation between NexPoint and Armada is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding NexPoint Diversified Real and Armada Hoffler Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armada Hoffler Properties and NexPoint Diversified 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 Diversified Real are associated (or correlated) with Armada Hoffler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armada Hoffler Properties has no effect on the direction of NexPoint Diversified i.e., NexPoint Diversified and Armada Hoffler go up and down completely randomly.

Pair Corralation between NexPoint Diversified and Armada Hoffler

Assuming the 90 days trading horizon NexPoint Diversified Real is expected to under-perform the Armada Hoffler. In addition to that, NexPoint Diversified is 1.74 times more volatile than Armada Hoffler Properties. It trades about -0.05 of its total potential returns per unit of risk. Armada Hoffler Properties is currently generating about 0.0 per unit of volatility. If you would invest  2,248  in Armada Hoffler Properties on December 23, 2024 and sell it today you would lose (4.00) from holding Armada Hoffler Properties or give up 0.18% of portfolio value over 90 days.

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

NexPoint Diversified Real  vs.  Armada Hoffler Properties

NexPoint Diversified Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days NexPoint Diversified Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NexPoint Diversified is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Armada Hoffler Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Armada Hoffler Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, Armada Hoffler 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 Diversified and Armada Hoffler

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

The idea behind NexPoint Diversified Real and Armada Hoffler Properties 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.