Correlation Between Nexpoint Residential and American Homes
Can any of the company-specific risk be diversified away by investing in both Nexpoint Residential and American Homes 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 Residential and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nexpoint Residential Trust and American Homes 4, you can compare the effects of market volatilities on Nexpoint Residential and American Homes 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 Residential with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexpoint Residential and American Homes.
Diversification Opportunities for Nexpoint Residential and American Homes
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nexpoint and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Residential Trust and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 and Nexpoint Residential 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 Residential Trust are associated (or correlated) with American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Nexpoint Residential i.e., Nexpoint Residential and American Homes go up and down completely randomly.
Pair Corralation between Nexpoint Residential and American Homes
Given the investment horizon of 90 days Nexpoint Residential Trust is expected to generate 1.38 times more return on investment than American Homes. However, Nexpoint Residential is 1.38 times more volatile than American Homes 4. It trades about -0.09 of its potential returns per unit of risk. American Homes 4 is currently generating about -0.21 per unit of risk. If you would invest 4,102 in Nexpoint Residential Trust on November 3, 2024 and sell it today you would lose (154.00) from holding Nexpoint Residential Trust or give up 3.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nexpoint Residential Trust vs. American Homes 4
Performance |
| Timeline |
| Nexpoint Residential |
| American Homes 4 |
Nexpoint Residential and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nexpoint Residential and American Homes
The main advantage of trading using opposite Nexpoint Residential and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexpoint Residential position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| Nexpoint Residential vs. Independence Realty Trust | Nexpoint Residential vs. Community Healthcare Trust | Nexpoint Residential vs. Terreno Realty | Nexpoint Residential vs. National Storage Affiliates |
| American Homes vs. Sun Communities | American Homes vs. Clipper Realty | American Homes vs. UDR Inc | American Homes vs. UMH Properties |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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