Correlation Between Diamond Hill and Nexpoint Real

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

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

Diversification Opportunities for Diamond Hill and Nexpoint Real

0.66

Correlation Coefficient

Diamond Hill  Nexpoint Real

Poor diversification

The 3 months correlation between Diamond and Nexpoint is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and Nexpoint Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Real Estate and Diamond Hill 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 Diamond Hill Investment are associated (or correlated) with Nexpoint Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexpoint Real Estate has no effect on the direction of Diamond Hill i.e., Diamond Hill and Nexpoint Real go up and down completely randomly.

Pair Corralation between Diamond Hill and Nexpoint Real

Given the investment horizon of 90 days Diamond Hill Investment is expected to under-perform the Nexpoint Real. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Hill Investment is 1.46 times less risky than Nexpoint Real. The stock trades about 0.0 of its potential returns per unit of risk. The Nexpoint Real Estate is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,248  in Nexpoint Real Estate on September 30, 2024 and sell it today you would earn a total of  284.00  from holding Nexpoint Real Estate or generate 22.76% return on investment over 90 days.

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

Diamond Hill Investment  vs.  Nexpoint Real Estate

Diamond Hill Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Hill Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Diamond Hill is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Nexpoint Real Estate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nexpoint Real Estate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Nexpoint Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Diamond Hill and Nexpoint Real

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

The idea behind Diamond Hill Investment and Nexpoint Real Estate 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.