Correlation Between Nexpoint Residential and Equity Lifestyle

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

Diversification Opportunities for Nexpoint Residential and Equity Lifestyle

0.37

Correlation Coefficient

Nexpoint Residential  Equity Lifestyle

Weak diversification

The 3 months correlation between Nexpoint and Equity is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Residential Trust and Equity Lifestyle Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Lifestyle Pro 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 Equity Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Lifestyle Pro has no effect on the direction of Nexpoint Residential i.e., Nexpoint Residential and Equity Lifestyle go up and down completely randomly.

Pair Corralation between Nexpoint Residential and Equity Lifestyle

Given the investment horizon of 90 days Nexpoint Residential Trust is expected to under-perform the Equity Lifestyle. In addition to that, Nexpoint Residential is 1.13 times more volatile than Equity Lifestyle Properties. It trades about -0.04 of its total potential returns per unit of risk. Equity Lifestyle Properties is currently generating about 0.02 per unit of volatility. If you would invest  6,554  in Equity Lifestyle Properties on December 29, 2024 and sell it today you would earn a total of  89.00  from holding Equity Lifestyle Properties or generate 1.36% return on investment over 90 days.

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

Nexpoint Residential Trust  vs.  Equity Lifestyle Properties

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.

Equity Lifestyle Pro

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Lifestyle Properties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Equity Lifestyle is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nexpoint Residential and Equity Lifestyle

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

The idea behind Nexpoint Residential Trust and Equity Lifestyle 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.