Correlation Between Mid America and Nexpoint Residential
Can any of the company-specific risk be diversified away by investing in both Mid America 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 Mid America and Nexpoint Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid America Apartment Communities and Nexpoint Residential Trust, you can compare the effects of market volatilities on Mid America 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 Mid America with a short position of Nexpoint Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid America and Nexpoint Residential.
Diversification Opportunities for Mid America and Nexpoint Residential
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mid and Nexpoint is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mid America Apartment Communit and Nexpoint Residential Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Residential and Mid America 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 Mid America Apartment 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 Mid America i.e., Mid America and Nexpoint Residential go up and down completely randomly.
Pair Corralation between Mid America and Nexpoint Residential
Assuming the 90 days trading horizon Mid America is expected to generate 14.12 times less return on investment than Nexpoint Residential. But when comparing it to its historical volatility, Mid America Apartment Communities is 2.95 times less risky than Nexpoint Residential. It trades about 0.1 of its potential returns per unit of risk. Nexpoint Residential Trust is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 4,076 in Nexpoint Residential Trust on September 2, 2024 and sell it today you would earn a total of 631.00 from holding Nexpoint Residential Trust or generate 15.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid America Apartment Communit vs. Nexpoint Residential Trust
Performance |
| Timeline |
| Mid America Apartment |
| Nexpoint Residential |
Mid America and Nexpoint Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid America and Nexpoint Residential
The main advantage of trading using opposite Mid America and Nexpoint Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid America 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.| Mid America vs. American Homes 4 | Mid America vs. BRT Realty Trust | Mid America vs. Nexpoint Residential Trust | Mid America vs. Centerspace |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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