Correlation Between Welltower and Boston Properties

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

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

Diversification Opportunities for Welltower and Boston Properties

0.06

Correlation Coefficient

Welltower  Boston Properties

Significant diversification

The 3 months correlation between Welltower and Boston is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and Welltower 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 Welltower are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of Welltower i.e., Welltower and Boston Properties go up and down completely randomly.

Pair Corralation between Welltower and Boston Properties

Given the investment horizon of 90 days Welltower is expected to under-perform the Boston Properties. But the stock apears to be less risky and, when comparing its historical volatility, Welltower is 1.34 times less risky than Boston Properties. The stock trades about -0.24 of its potential returns per unit of risk. The Boston Properties is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  8,196  in Boston Properties on September 12, 2024 and sell it today you would lose (77.00) from holding Boston Properties or give up 0.94% of portfolio value over 90 days.

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

Welltower  vs.  Boston Properties

Welltower

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Welltower is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Boston Properties

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Properties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Boston Properties is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Welltower and Boston Properties

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

The idea behind Welltower and Boston Properties 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.