Correlation Between NexPoint Diversified and One Liberty

Can any of the company-specific risk be diversified away by investing in both NexPoint Diversified and One Liberty 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 One Liberty 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 One Liberty Properties, you can compare the effects of market volatilities on NexPoint Diversified and One Liberty 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 One Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexPoint Diversified and One Liberty.

Diversification Opportunities for NexPoint Diversified and One Liberty

0.44

Correlation Coefficient

NexPoint Diversified  One Liberty

Very weak diversification

The 3 months correlation between NexPoint and One is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding NexPoint Diversified Real and One Liberty Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Liberty 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 One Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Liberty Properties has no effect on the direction of NexPoint Diversified i.e., NexPoint Diversified and One Liberty go up and down completely randomly.

Pair Corralation between NexPoint Diversified and One Liberty

Assuming the 90 days trading horizon NexPoint Diversified Real is expected to generate 1.2 times more return on investment than One Liberty. However, NexPoint Diversified is 1.2 times more volatile than One Liberty Properties. It trades about -0.02 of its potential returns per unit of risk. One Liberty Properties is currently generating about -0.15 per unit of risk. If you would invest  1,588  in NexPoint Diversified Real on November 28, 2024 and sell it today you would lose (32.00) from holding NexPoint Diversified Real or give up 2.02% of portfolio value over 90 days.

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

NexPoint Diversified Real  vs.  One Liberty 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.

One Liberty Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days One Liberty Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's essential indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with NexPoint Diversified and One Liberty

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

The idea behind NexPoint Diversified Real and One Liberty 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.