Correlation Between Nexpoint Residential and Elme Communities

Can any of the company-specific risk be diversified away by investing in both Nexpoint Residential and Elme Communities 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 Elme Communities 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 Elme Communities, you can compare the effects of market volatilities on Nexpoint Residential and Elme Communities 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 Elme Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexpoint Residential and Elme Communities.

Diversification Opportunities for Nexpoint Residential and Elme Communities

0.05

Correlation Coefficient

Nexpoint Residential  Elme Communities

Significant diversification

The 3 months correlation between Nexpoint and Elme is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Residential Trust and Elme Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elme Communities 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 Elme Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elme Communities has no effect on the direction of Nexpoint Residential i.e., Nexpoint Residential and Elme Communities go up and down completely randomly.

Pair Corralation between Nexpoint Residential and Elme Communities

Given the investment horizon of 90 days Nexpoint Residential Trust is expected to under-perform the Elme Communities. In addition to that, Nexpoint Residential is 1.46 times more volatile than Elme Communities. It trades about -0.19 of its total potential returns per unit of risk. Elme Communities is currently generating about -0.05 per unit of volatility. If you would invest  1,571  in Elme Communities on May 5, 2025 and sell it today you would lose (60.00) from holding Elme Communities or give up 3.82% of portfolio value over 90 days.

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

Nexpoint Residential Trust  vs.  Elme Communities

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 September 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Elme Communities

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nexpoint Residential and Elme Communities

The main advantage of trading using opposite Nexpoint Residential and Elme Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexpoint Residential position performs unexpectedly, Elme Communities 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 Elme Communities will offset losses from the drop in Elme Communities' long position.

The idea behind Nexpoint Residential Trust and Elme Communities 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.