Correlation Between Nexpoint Residential and Independence Realty
Can any of the company-specific risk be diversified away by investing in both Nexpoint Residential and Independence Realty 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 Independence Realty 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 Independence Realty Trust, you can compare the effects of market volatilities on Nexpoint Residential and Independence Realty 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 Independence Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexpoint Residential and Independence Realty.
Diversification Opportunities for Nexpoint Residential and Independence Realty
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nexpoint and Independence is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Residential Trust and Independence Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independence Realty Trust 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 Independence Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independence Realty Trust has no effect on the direction of Nexpoint Residential i.e., Nexpoint Residential and Independence Realty go up and down completely randomly.
Pair Corralation between Nexpoint Residential and Independence Realty
Given the investment horizon of 90 days Nexpoint Residential is expected to generate 1.8 times less return on investment than Independence Realty. In addition to that, Nexpoint Residential is 1.26 times more volatile than Independence Realty Trust. It trades about 0.12 of its total potential returns per unit of risk. Independence Realty Trust is currently generating about 0.26 per unit of volatility. 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 |
Nexpoint Residential Trust vs. Independence Realty Trust
Performance |
| Timeline |
| Nexpoint Residential |
| Independence Realty Trust |
Nexpoint Residential and Independence Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nexpoint Residential and Independence Realty
The main advantage of trading using opposite Nexpoint Residential and Independence Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexpoint Residential position performs unexpectedly, Independence Realty 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 Independence Realty will offset losses from the drop in Independence Realty's 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 |
| Independence Realty vs. Nexpoint Residential Trust | Independence Realty vs. Centerspace | Independence Realty vs. Equity Lifestyle Properties | Independence Realty vs. Elme Communities |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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