Correlation Between Haier Smart and Welltower

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

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

Diversification Opportunities for Haier Smart and Welltower

0.7

Correlation Coefficient

Haier Smart  Welltower

Poor diversification

The 3 months correlation between Haier and Welltower is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Haier Smart Home and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower and Haier Smart 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 Haier Smart Home 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 Haier Smart i.e., Haier Smart and Welltower go up and down completely randomly.

Pair Corralation between Haier Smart and Welltower

Assuming the 90 days trading horizon Haier Smart is expected to generate 4.16 times less return on investment than Welltower. But when comparing it to its historical volatility, Haier Smart Home is 1.08 times less risky than Welltower. It trades about 0.05 of its potential returns per unit of risk. Welltower is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  11,832  in Welltower on December 30, 2024 and sell it today you would earn a total of  2,278  from holding Welltower or generate 19.25% return on investment over 90 days.

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

Haier Smart Home  vs.  Welltower

Haier Smart Home

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Haier Smart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Welltower

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Welltower reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Haier Smart and Welltower

The main advantage of trading using opposite Haier Smart and Welltower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haier Smart 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 Haier Smart Home 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.