Correlation Between Boston Properties and Welltower

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

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

Diversification Opportunities for Boston Properties and Welltower

-0.25

Correlation Coefficient

Boston Properties  Welltower

Very good diversification

The 3 months correlation between Boston and Welltower is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower and Boston Properties 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 Boston Properties 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 Boston Properties i.e., Boston Properties and Welltower go up and down completely randomly.

Pair Corralation between Boston Properties and Welltower

Considering the 90-day investment horizon Boston Properties is expected to under-perform the Welltower. In addition to that, Boston Properties is 1.45 times more volatile than Welltower. It trades about -0.13 of its total potential returns per unit of risk. Welltower is currently generating about 0.13 per unit of volatility. If you would invest  13,757  in Welltower on November 28, 2024 and sell it today you would earn a total of  1,417  from holding Welltower or generate 10.3% return on investment over 90 days.

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

Boston Properties  vs.  Welltower

Boston Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Welltower

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Welltower may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Boston Properties and Welltower

The main advantage of trading using opposite Boston Properties and Welltower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Properties 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 Boston Properties 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.