Correlation Between Nexpoint Residential and Urban Edge

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

Diversification Opportunities for Nexpoint Residential and Urban Edge

0.94

Correlation Coefficient

Nexpoint Residential  Urban Edge

Almost no diversification

The 3 months correlation between Nexpoint and Urban is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Residential Trust and Urban Edge Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urban Edge Properties 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 Urban Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Urban Edge Properties has no effect on the direction of Nexpoint Residential i.e., Nexpoint Residential and Urban Edge go up and down completely randomly.

Pair Corralation between Nexpoint Residential and Urban Edge

Given the investment horizon of 90 days Nexpoint Residential Trust is expected to generate 1.18 times more return on investment than Urban Edge. However, Nexpoint Residential is 1.18 times more volatile than Urban Edge Properties. It trades about -0.07 of its potential returns per unit of risk. Urban Edge Properties is currently generating about -0.11 per unit of risk. If you would invest  4,616  in Nexpoint Residential Trust on December 1, 2024 and sell it today you would lose (361.00) from holding Nexpoint Residential Trust or give up 7.82% of portfolio value over 90 days.

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

Nexpoint Residential Trust  vs.  Urban Edge 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 latest uncertain 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.

Urban Edge Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Urban Edge Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Nexpoint Residential and Urban Edge

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

The idea behind Nexpoint Residential Trust and Urban Edge 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.