Correlation Between UMH Properties and Nexpoint Residential

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

By analyzing existing cross correlation between UMH Properties and Nexpoint Residential Trust, you can compare the effects of market volatilities on UMH Properties and Nexpoint Residential 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 UMH Properties with a short position of Nexpoint Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of UMH Properties and Nexpoint Residential.

Diversification Opportunities for UMH Properties and Nexpoint Residential

0.73

Correlation Coefficient

UMH Properties  Nexpoint Residential

Poor diversification

The 3 months correlation between UMH and Nexpoint is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding UMH Properties and Nexpoint Residential Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Residential and UMH Properties 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 UMH Properties are associated (or correlated) with Nexpoint Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexpoint Residential has no effect on the direction of UMH Properties i.e., UMH Properties and Nexpoint Residential go up and down completely randomly.

Pair Corralation between UMH Properties and Nexpoint Residential

Considering the 90-day investment horizon UMH Properties is expected to generate 0.82 times more return on investment than Nexpoint Residential. However, UMH Properties is 1.21 times less risky than Nexpoint Residential. It trades about 0.01 of its potential returns per unit of risk. Nexpoint Residential Trust is currently generating about -0.04 per unit of risk. If you would invest  1,850  in UMH Properties on December 28, 2024 and sell it today you would earn a total of  1.00  from holding UMH Properties or generate 0.05% return on investment over 90 days.

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

UMH Properties  vs.  Nexpoint Residential Trust

UMH Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days UMH Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, UMH Properties is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with UMH Properties and Nexpoint Residential

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

The idea behind UMH Properties and Nexpoint Residential Trust 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.