Correlation Between Welltower and Extra Space

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

By analyzing existing cross correlation between Welltower and Extra Space Storage, you can compare the effects of market volatilities on Welltower and Extra Space 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 Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of Welltower and Extra Space.

Diversification Opportunities for Welltower and Extra Space

-0.58

Correlation Coefficient

Welltower  Extra Space

Excellent diversification

The 3 months correlation between Welltower and Extra is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage 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 Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of Welltower i.e., Welltower and Extra Space go up and down completely randomly.

Pair Corralation between Welltower and Extra Space

Given the investment horizon of 90 days Welltower is expected to generate 0.94 times more return on investment than Extra Space. However, Welltower is 1.07 times less risky than Extra Space. It trades about 0.16 of its potential returns per unit of risk. Extra Space Storage is currently generating about -0.02 per unit of risk. If you would invest  12,146  in Welltower on September 2, 2024 and sell it today you would earn a total of  1,672  from holding Welltower or generate 13.77% return on investment over 90 days.

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

Welltower  vs.  Extra Space Storage

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.

Extra Space Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Extra Space Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Extra Space is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Welltower and Extra Space

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

The idea behind Welltower and Extra Space Storage 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.