Correlation Between AvalonBay Communities and Nexpoint Residential
Can any of the company-specific risk be diversified away by investing in both AvalonBay Communities 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 AvalonBay Communities and Nexpoint Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AvalonBay Communities and Nexpoint Residential Trust, you can compare the effects of market volatilities on AvalonBay Communities 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 AvalonBay Communities with a short position of Nexpoint Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of AvalonBay Communities and Nexpoint Residential.
Diversification Opportunities for AvalonBay Communities and Nexpoint Residential
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AvalonBay and Nexpoint is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and Nexpoint Residential Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Residential and AvalonBay Communities 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 AvalonBay Communities 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 AvalonBay Communities i.e., AvalonBay Communities and Nexpoint Residential go up and down completely randomly.
Pair Corralation between AvalonBay Communities and Nexpoint Residential
Considering the 90-day investment horizon AvalonBay Communities is expected to generate 6.04 times less return on investment than Nexpoint Residential. But when comparing it to its historical volatility, AvalonBay Communities is 1.12 times less risky than Nexpoint Residential. It trades about 0.02 of its potential returns per unit of risk. Nexpoint Residential Trust is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,436 in Nexpoint Residential Trust on August 24, 2024 and sell it today you would earn a total of 182.00 from holding Nexpoint Residential Trust or generate 4.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AvalonBay Communities vs. Nexpoint Residential Trust
Performance |
| Timeline |
| AvalonBay Communities |
| Nexpoint Residential |
AvalonBay Communities and Nexpoint Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AvalonBay Communities and Nexpoint Residential
The main advantage of trading using opposite AvalonBay Communities and Nexpoint Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvalonBay Communities 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.| AvalonBay Communities vs. Essex Property Trust | AvalonBay Communities vs. UDR Inc | AvalonBay Communities vs. Mid America Apartment Communities | AvalonBay Communities vs. Camden Property Trust |
| Nexpoint Residential vs. Independence Realty Trust | Nexpoint Residential vs. Community Healthcare Trust | Nexpoint Residential vs. Terreno Realty | Nexpoint Residential vs. National Storage Affiliates |
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 Stocks Directory module to find actively traded stocks across global markets.
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