Correlation Between Ares Commercial and Nexpoint Real
Can any of the company-specific risk be diversified away by investing in both Ares Commercial 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 Ares Commercial and Nexpoint Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Commercial Real and Nexpoint Real Estate, you can compare the effects of market volatilities on Ares Commercial 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 Ares Commercial with a short position of Nexpoint Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Commercial and Nexpoint Real.
Diversification Opportunities for Ares Commercial and Nexpoint Real
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ares and Nexpoint is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ares Commercial Real 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 Ares Commercial 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 Ares Commercial Real 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 Ares Commercial i.e., Ares Commercial and Nexpoint Real go up and down completely randomly.
Pair Corralation between Ares Commercial and Nexpoint Real
Given the investment horizon of 90 days Ares Commercial Real is expected to under-perform the Nexpoint Real. In addition to that, Ares Commercial is 2.33 times more volatile than Nexpoint Real Estate. It trades about -0.21 of its total potential returns per unit of risk. Nexpoint Real Estate is currently generating about -0.01 per unit of volatility. If you would invest 1,567 in Nexpoint Real Estate on November 18, 2024 and sell it today you would lose (8.00) from holding Nexpoint Real Estate or give up 0.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Commercial Real vs. Nexpoint Real Estate
Performance |
| Timeline |
| Ares Commercial Real |
| Nexpoint Real Estate |
Ares Commercial and Nexpoint Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Commercial and Nexpoint Real
The main advantage of trading using opposite Ares Commercial and Nexpoint Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Commercial 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.| Ares Commercial vs. Two Harbors Investments | Ares Commercial vs. Apollo Commercial Real | Ares Commercial vs. Ellington Financial | Ares Commercial vs. Dynex Capital |
| Nexpoint Real vs. Ellington Residential Mortgage | Nexpoint Real vs. Ares Commercial Real | Nexpoint Real vs. TPG RE Finance | Nexpoint Real vs. Ellington Financial |
Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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