Correlation Between Transamerica Intermediate and Nexpoint Real

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

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

Diversification Opportunities for Transamerica Intermediate and Nexpoint Real

0.33

Correlation Coefficient

Transamerica Intermediate  Nexpoint Real

Weak diversification

The 3 months correlation between Transamerica and Nexpoint is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Intermediate Muni and Nexpoint Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Real Estate and Transamerica Intermediate 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 Transamerica Intermediate Muni are associated (or correlated) with Nexpoint Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexpoint Real Estate has no effect on the direction of Transamerica Intermediate i.e., Transamerica Intermediate and Nexpoint Real go up and down completely randomly.

Pair Corralation between Transamerica Intermediate and Nexpoint Real

Assuming the 90 days horizon Transamerica Intermediate is expected to generate 1.85 times less return on investment than Nexpoint Real. But when comparing it to its historical volatility, Transamerica Intermediate Muni is 1.06 times less risky than Nexpoint Real. It trades about 0.05 of its potential returns per unit of risk. Nexpoint Real Estate is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,608  in Nexpoint Real Estate on December 25, 2024 and sell it today you would earn a total of  17.00  from holding Nexpoint Real Estate or generate 1.06% return on investment over 90 days.

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

Transamerica Intermediate Muni  vs.  Nexpoint Real Estate

Transamerica Intermediate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Intermediate Muni are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nexpoint Real Estate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nexpoint Real Estate are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Nexpoint Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Transamerica Intermediate and Nexpoint Real

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

The idea behind Transamerica Intermediate Muni and Nexpoint 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..