Correlation Between SL Green and Welltower

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

By analyzing existing cross correlation between SL Green Realty and Welltower, you can compare the effects of market volatilities on SL Green and Welltower 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 SL Green with a short position of Welltower. Check out your portfolio center. Please also check ongoing floating volatility patterns of SL Green and Welltower.

Diversification Opportunities for SL Green and Welltower

0.88

Correlation Coefficient

SL Green  Welltower

Very poor diversification

The 3 months correlation between SLG and Welltower is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SL Green Realty and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower and SL Green 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 SL Green Realty are associated (or correlated) with Welltower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welltower has no effect on the direction of SL Green i.e., SL Green and Welltower go up and down completely randomly.

Pair Corralation between SL Green and Welltower

Considering the 90-day investment horizon SL Green Realty is expected to generate 1.39 times more return on investment than Welltower. However, SL Green is 1.39 times more volatile than Welltower. It trades about 0.19 of its potential returns per unit of risk. Welltower is currently generating about 0.16 per unit of risk. If you would invest  6,372  in SL Green Realty on September 2, 2024 and sell it today you would earn a total of  1,447  from holding SL Green Realty or generate 22.71% return on investment over 90 days.

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

SL Green Realty  vs.  Welltower

SL Green Realty

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SL Green Realty are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, SL Green reported solid returns over the last few months and may actually be approaching a breakup point.

Welltower

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Welltower disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SL Green and Welltower

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

The idea behind SL Green Realty and Welltower 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.