Correlation Between Welltower and Real Estate

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

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

Diversification Opportunities for Welltower and Real Estate

-0.41

Correlation Coefficient

Welltower  Real Estate

Very good diversification

The 3 months correlation between Welltower and Real is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of Welltower i.e., Welltower and Real Estate go up and down completely randomly.

Pair Corralation between Welltower and Real Estate

Given the investment horizon of 90 days Welltower is expected to under-perform the Real Estate. In addition to that, Welltower is 2.97 times more volatile than Real Estate Securities. It trades about -0.25 of its total potential returns per unit of risk. Real Estate Securities is currently generating about 0.6 per unit of volatility. If you would invest  2,950  in Real Estate Securities on September 19, 2024 and sell it today you would earn a total of  45.00  from holding Real Estate Securities or generate 1.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	33.33%
Values	Daily Returns

Welltower  vs.  Real Estate Securities

Welltower

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 3 (%) 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.

Real Estate Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Estate Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Real Estate is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Welltower and Real Estate

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

The idea behind Welltower and Real Estate Securities 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.