Correlation Between Nexpoint Residential and InterRent Real

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

Diversification Opportunities for Nexpoint Residential and InterRent Real

-0.09

Correlation Coefficient

Nexpoint Residential  InterRent Real

Good diversification

The 3 months correlation between Nexpoint and InterRent is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Residential Trust and InterRent Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterRent Real Estate 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 InterRent Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterRent Real Estate has no effect on the direction of Nexpoint Residential i.e., Nexpoint Residential and InterRent Real go up and down completely randomly.

Pair Corralation between Nexpoint Residential and InterRent Real

Given the investment horizon of 90 days Nexpoint Residential Trust is expected to under-perform the InterRent Real. But the stock apears to be less risky and, when comparing its historical volatility, Nexpoint Residential Trust is 1.21 times less risky than InterRent Real. The stock trades about -0.09 of its potential returns per unit of risk. The InterRent Real Estate is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  711.00  in InterRent Real Estate on December 22, 2024 and sell it today you would earn a total of  57.00  from holding InterRent Real Estate or generate 8.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.21%
Values	Daily Returns

Nexpoint Residential Trust  vs.  InterRent Real Estate

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

InterRent Real Estate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in InterRent Real Estate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, InterRent Real reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nexpoint Residential and InterRent Real

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

The idea behind Nexpoint Residential Trust and InterRent Real Estate 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.