Correlation Between Independence Realty and Nexpoint Residential
Can any of the company-specific risk be diversified away by investing in both Independence Realty 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 Independence Realty and Nexpoint Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Independence Realty Trust and Nexpoint Residential Trust, you can compare the effects of market volatilities on Independence Realty 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 Independence Realty with a short position of Nexpoint Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Independence Realty and Nexpoint Residential.
Diversification Opportunities for Independence Realty and Nexpoint Residential
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Independence and Nexpoint is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Independence Realty Trust and Nexpoint Residential Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Residential and Independence Realty 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 Independence Realty Trust 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 Independence Realty i.e., Independence Realty and Nexpoint Residential go up and down completely randomly.
Pair Corralation between Independence Realty and Nexpoint Residential
Considering the 90-day investment horizon Independence Realty Trust is expected to generate 0.8 times more return on investment than Nexpoint Residential. However, Independence Realty Trust is 1.26 times less risky than Nexpoint Residential. It trades about 0.25 of its potential returns per unit of risk. Nexpoint Residential Trust is currently generating about 0.11 per unit of risk. If you would invest 1,991 in Independence Realty Trust on August 24, 2024 and sell it today you would earn a total of 157.00 from holding Independence Realty Trust or generate 7.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Independence Realty Trust vs. Nexpoint Residential Trust
Performance |
| Timeline |
| Independence Realty Trust |
| Nexpoint Residential |
Independence Realty and Nexpoint Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Independence Realty and Nexpoint Residential
The main advantage of trading using opposite Independence Realty and Nexpoint Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independence Realty 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.| Independence Realty vs. Apartment Investment and | Independence Realty vs. Clipper Realty | Independence Realty vs. BRT Realty Trust | Independence Realty vs. UDR Inc |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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