Correlation Between Sachem Capital and NexPoint Real

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

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

Diversification Opportunities for Sachem Capital and NexPoint Real

0.12

Correlation Coefficient

Sachem Capital  NexPoint Real

Average diversification

The 3 months correlation between Sachem and NexPoint is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sachem Capital Corp 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 Sachem Capital 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 Sachem Capital Corp 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 Sachem Capital i.e., Sachem Capital and NexPoint Real go up and down completely randomly.

Pair Corralation between Sachem Capital and NexPoint Real

Assuming the 90 days trading horizon Sachem Capital Corp is expected to under-perform the NexPoint Real. In addition to that, Sachem Capital is 2.75 times more volatile than NexPoint Real Estate. It trades about -0.15 of its total potential returns per unit of risk. NexPoint Real Estate is currently generating about 0.04 per unit of volatility. If you would invest  2,284  in NexPoint Real Estate on September 25, 2024 and sell it today you would earn a total of  46.00  from holding NexPoint Real Estate or generate 2.01% return on investment over 90 days.

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

Sachem Capital Corp  vs.  NexPoint Real Estate

Sachem Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sachem Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NexPoint Real Estate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NexPoint Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NexPoint Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sachem Capital and NexPoint Real

The main advantage of trading using opposite Sachem Capital and NexPoint Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sachem Capital 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 Sachem Capital Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.