Correlation Between Nexpoint Residential and Crown Castle

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

Diversification Opportunities for Nexpoint Residential and Crown Castle

-0.69

Correlation Coefficient

Nexpoint Residential  Crown Castle

Excellent diversification

The 3 months correlation between Nexpoint and Crown is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Residential Trust and Crown Castle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Castle 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 Crown Castle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Castle has no effect on the direction of Nexpoint Residential i.e., Nexpoint Residential and Crown Castle go up and down completely randomly.

Pair Corralation between Nexpoint Residential and Crown Castle

Given the investment horizon of 90 days Nexpoint Residential Trust is expected to generate 1.32 times more return on investment than Crown Castle. However, Nexpoint Residential is 1.32 times more volatile than Crown Castle. It trades about 0.28 of its potential returns per unit of risk. Crown Castle is currently generating about -0.25 per unit of risk. If you would invest  3,060  in Nexpoint Residential Trust on February 2, 2024 and sell it today you would earn a total of  347.00  from holding Nexpoint Residential Trust or generate 11.34% return on investment over 90 days.

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

Nexpoint Residential Trust  vs.  Crown Castle

Nexpoint Residential

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexpoint Residential Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nexpoint Residential may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Crown Castle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Castle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Nexpoint Residential and Crown Castle

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

The idea behind Nexpoint Residential Trust and Crown Castle 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.