Correlation Between Nexpoint Residential and Centerspace

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

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

Diversification Opportunities for Nexpoint Residential and Centerspace

0.69

Correlation Coefficient

Nexpoint Residential  Centerspace

Poor diversification

The 3 months correlation between Nexpoint and Centerspace is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Residential Trust and Centerspace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerspace and Nexpoint Residential 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 Residential Trust are associated (or correlated) with Centerspace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerspace has no effect on the direction of Nexpoint Residential i.e., Nexpoint Residential and Centerspace go up and down completely randomly.

Pair Corralation between Nexpoint Residential and Centerspace

Given the investment horizon of 90 days Nexpoint Residential Trust is expected to under-perform the Centerspace. In addition to that, Nexpoint Residential is 1.22 times more volatile than Centerspace. It trades about -0.05 of its total potential returns per unit of risk. Centerspace is currently generating about -0.03 per unit of volatility. If you would invest  6,536  in Centerspace on December 31, 2024 and sell it today you would lose (164.00) from holding Centerspace or give up 2.51% of portfolio value over 90 days.

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

Nexpoint Residential Trust  vs.  Centerspace

Nexpoint Residential

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nexpoint Residential Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nexpoint Residential is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Centerspace

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centerspace has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Centerspace is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Nexpoint Residential and Centerspace

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

The idea behind Nexpoint Residential Trust and Centerspace 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.