Correlation Between Nexpoint Residential and Equinix

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

Diversification Opportunities for Nexpoint Residential and Equinix

-0.8

Correlation Coefficient

Nexpoint Residential  Equinix

Pay attention - limited upside

The 3 months correlation between Nexpoint and Equinix is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Nexpoint Residential Trust and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Nexpoint Residential i.e., Nexpoint Residential and Equinix go up and down completely randomly.

Pair Corralation between Nexpoint Residential and Equinix

Given the investment horizon of 90 days Nexpoint Residential Trust is expected to generate 1.53 times more return on investment than Equinix. However, Nexpoint Residential is 1.53 times more volatile than Equinix. It trades about 0.2 of its potential returns per unit of risk. Equinix is currently generating about -0.41 per unit of risk. If you would invest  3,157  in Nexpoint Residential Trust on January 31, 2024 and sell it today you would earn a total of  267.00  from holding Nexpoint Residential Trust or generate 8.46% return on investment over 90 days.

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

Nexpoint Residential Trust  vs.  Equinix

Nexpoint Residential

Risk-Adjusted Performance

6 of 100

Modest

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 May 2024.

Equinix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equinix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nexpoint Residential and Equinix

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

The idea behind Nexpoint Residential Trust and Equinix 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 Global Correlations module to find global opportunities by holding instruments from different markets.