Correlation Between Global Net and Nexpoint Residential

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

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

Diversification Opportunities for Global Net and Nexpoint Residential

0.4

Correlation Coefficient

Global Net  Nexpoint Residential

Very weak diversification

The 3 months correlation between Global and Nexpoint is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and Nexpoint Residential Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Residential and Global Net 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 Global Net Lease 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 Global Net i.e., Global Net and Nexpoint Residential go up and down completely randomly.

Pair Corralation between Global Net and Nexpoint Residential

Assuming the 90 days trading horizon Global Net Lease is expected to generate 0.55 times more return on investment than Nexpoint Residential. However, Global Net Lease is 1.82 times less risky than Nexpoint Residential. It trades about -0.01 of its potential returns per unit of risk. Nexpoint Residential Trust is currently generating about -0.12 per unit of risk. If you would invest  2,294  in Global Net Lease on March 1, 2025 and sell it today you would lose (31.00) from holding Global Net Lease or give up 1.35% of portfolio value over 90 days.

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

Global Net Lease  vs.  Nexpoint Residential Trust

Global Net Lease

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Global Net is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Nexpoint Residential

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nexpoint Residential Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Global Net and Nexpoint Residential

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

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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.