Correlation Between Apartment Investment and Nexpoint Residential

Can any of the company-specific risk be diversified away by investing in both Apartment Investment 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 Apartment Investment and Nexpoint Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apartment Investment and and Nexpoint Residential Trust, you can compare the effects of market volatilities on Apartment Investment 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 Apartment Investment with a short position of Nexpoint Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apartment Investment and Nexpoint Residential.

Diversification Opportunities for Apartment Investment and Nexpoint Residential

0.82

Correlation Coefficient

Apartment Investment  Nexpoint Residential

Very poor diversification

The 3 months correlation between Apartment and Nexpoint is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Apartment Investment and and Nexpoint Residential Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Residential and Apartment Investment 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 Apartment Investment and 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 Apartment Investment i.e., Apartment Investment and Nexpoint Residential go up and down completely randomly.

Pair Corralation between Apartment Investment and Nexpoint Residential

Considering the 90-day investment horizon Apartment Investment and is expected to under-perform the Nexpoint Residential. But the stock apears to be less risky and, when comparing its historical volatility, Apartment Investment and is 1.24 times less risky than Nexpoint Residential. The stock trades about -0.06 of its potential returns per unit of risk. The Nexpoint Residential Trust is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,840  in Nexpoint Residential Trust on February 3, 2025 and sell it today you would earn a total of  20.00  from holding Nexpoint Residential Trust or generate 0.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Apartment Investment and  vs.  Nexpoint Residential Trust

Apartment Investment and

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apartment Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Nexpoint Residential

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nexpoint Residential Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nexpoint Residential is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apartment Investment and Nexpoint Residential

The main advantage of trading using opposite Apartment Investment and Nexpoint Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apartment Investment 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.

The idea behind Apartment Investment and and Nexpoint Residential Trust 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.