Correlation Between Economic Investment and NexPoint Hospitality
Can any of the company-specific risk be diversified away by investing in both Economic Investment and NexPoint Hospitality 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 Economic Investment and NexPoint Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Economic Investment Trust and NexPoint Hospitality Trust, you can compare the effects of market volatilities on Economic Investment and NexPoint Hospitality 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 Economic Investment with a short position of NexPoint Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Economic Investment and NexPoint Hospitality.
Diversification Opportunities for Economic Investment and NexPoint Hospitality
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Economic and NexPoint is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust and NexPoint Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexPoint Hospitality and Economic Investment 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 Economic Investment Trust are associated (or correlated) with NexPoint Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexPoint Hospitality has no effect on the direction of Economic Investment i.e., Economic Investment and NexPoint Hospitality go up and down completely randomly.
Pair Corralation between Economic Investment and NexPoint Hospitality
Assuming the 90 days trading horizon Economic Investment is expected to generate 174.7 times less return on investment than NexPoint Hospitality. But when comparing it to its historical volatility, Economic Investment Trust is 336.59 times less risky than NexPoint Hospitality. It trades about 0.4 of its potential returns per unit of risk. NexPoint Hospitality Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1.50 in NexPoint Hospitality Trust on August 30, 2024 and sell it today you would earn a total of 29.50 from holding NexPoint Hospitality Trust or generate 1966.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Economic Investment Trust vs. NexPoint Hospitality Trust
Performance |
| Timeline |
| Economic Investment Trust |
| NexPoint Hospitality |
Economic Investment and NexPoint Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Economic Investment and NexPoint Hospitality
The main advantage of trading using opposite Economic Investment and NexPoint Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Economic Investment position performs unexpectedly, NexPoint Hospitality 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 Hospitality will offset losses from the drop in NexPoint Hospitality's long position.| Economic Investment vs. Enbridge Pref 5 | Economic Investment vs. Enbridge Pref 11 | Economic Investment vs. Enbridge Pref L | Economic Investment vs. E Split Corp |
| NexPoint Hospitality vs. Bip Investment Corp | NexPoint Hospitality vs. CNJ Capital Investments | NexPoint Hospitality vs. Diversified Royalty Corp | NexPoint Hospitality vs. Economic Investment Trust |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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