Correlation Between Equinix and Welltower

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

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

Diversification Opportunities for Equinix and Welltower

0.85

Correlation Coefficient

Equinix  Welltower

Very poor diversification

The 3 months correlation between Equinix and Welltower is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower and Equinix 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 Equinix 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 Equinix i.e., Equinix and Welltower go up and down completely randomly.

Pair Corralation between Equinix and Welltower

Given the investment horizon of 90 days Equinix is expected to generate 0.88 times more return on investment than Welltower. However, Equinix is 1.13 times less risky than Welltower. It trades about 0.24 of its potential returns per unit of risk. Welltower is currently generating about 0.16 per unit of risk. If you would invest  82,822  in Equinix on September 2, 2024 and sell it today you would earn a total of  15,326  from holding Equinix or generate 18.5% return on investment over 90 days.

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

Equinix  vs.  Welltower

Equinix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Equinix showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Equinix and Welltower

The main advantage of trading using opposite Equinix and Welltower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix 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 Equinix 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 Stocks Directory module to find actively traded stocks across global markets.