Correlation Between NexPoint Real and AG Mortgage

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Can any of the company-specific risk be diversified away by investing in both NexPoint Real and AG Mortgage 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 NexPoint Real and AG Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NexPoint Real Estate and AG Mortgage Investment, you can compare the effects of market volatilities on NexPoint Real and AG Mortgage 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 NexPoint Real with a short position of AG Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexPoint Real and AG Mortgage.

Diversification Opportunities for NexPoint Real and AG Mortgage

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between NexPoint and MITT-PA is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NexPoint Real Estate and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage Investment and NexPoint Real 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 NexPoint Real Estate are associated (or correlated) with AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of NexPoint Real i.e., NexPoint Real and AG Mortgage go up and down completely randomly.

Pair Corralation between NexPoint Real and AG Mortgage

Assuming the 90 days trading horizon NexPoint Real is expected to generate 15.71 times less return on investment than AG Mortgage. In addition to that, NexPoint Real is 1.91 times more volatile than AG Mortgage Investment. It trades about 0.0 of its total potential returns per unit of risk. AG Mortgage Investment is currently generating about 0.13 per unit of volatility. If you would invest  2,190  in AG Mortgage Investment on September 13, 2024 and sell it today you would earn a total of  30.00  from holding AG Mortgage Investment or generate 1.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

NexPoint Real Estate  vs.  AG Mortgage Investment

 Performance 
       Timeline  
NexPoint Real Estate 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NexPoint Real Estate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, NexPoint Real may actually be approaching a critical reversion point that can send shares even higher in January 2025.
AG Mortgage Investment 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AG Mortgage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NexPoint Real and AG Mortgage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NexPoint Real and AG Mortgage

The main advantage of trading using opposite NexPoint Real and AG Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NexPoint Real position performs unexpectedly, AG Mortgage 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 AG Mortgage will offset losses from the drop in AG Mortgage's long position.
The idea behind NexPoint Real Estate and AG Mortgage Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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