Correlation Between Welltower and Invitation Homes

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

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

Diversification Opportunities for Welltower and Invitation Homes

-0.25

Correlation Coefficient

Welltower  Invitation Homes

Very good diversification

The 3 months correlation between Welltower and Invitation is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes 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 Invitation Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invitation Homes has no effect on the direction of Welltower i.e., Welltower and Invitation Homes go up and down completely randomly.

Pair Corralation between Welltower and Invitation Homes

Given the investment horizon of 90 days Welltower is expected to under-perform the Invitation Homes. In addition to that, Welltower is 1.2 times more volatile than Invitation Homes. It trades about -0.38 of its total potential returns per unit of risk. Invitation Homes is currently generating about -0.35 per unit of volatility. If you would invest  3,403  in Invitation Homes on September 20, 2024 and sell it today you would lose (242.00) from holding Invitation Homes or give up 7.11% of portfolio value over 90 days.

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

Welltower  vs.  Invitation Homes

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.

Invitation Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invitation Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Welltower and Invitation Homes

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

The idea behind Welltower and Invitation Homes 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 Stocks Directory module to find actively traded stocks across global markets.