Correlation Between Nexpoint Residential and Sun Communities

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

Diversification Opportunities for Nexpoint Residential and Sun Communities

0.1

Correlation Coefficient

Nexpoint Residential  Sun Communities

Average diversification

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

Pair Corralation between Nexpoint Residential and Sun Communities

Given the investment horizon of 90 days Nexpoint Residential Trust is expected to under-perform the Sun Communities. But the stock apears to be less risky and, when comparing its historical volatility, Nexpoint Residential Trust is 1.02 times less risky than Sun Communities. The stock trades about -0.04 of its potential returns per unit of risk. The Sun Communities is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  12,176  in Sun Communities on December 28, 2024 and sell it today you would earn a total of  635.00  from holding Sun Communities or generate 5.22% return on investment over 90 days.

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

Nexpoint Residential Trust  vs.  Sun Communities

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.

Sun Communities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Communities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Sun Communities is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Nexpoint Residential and Sun Communities

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

The idea behind Nexpoint Residential Trust and Sun Communities 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.