Correlation Between Welltower and PARKWAY LIFE

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

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

Diversification Opportunities for Welltower and PARKWAY LIFE

-0.68

Correlation Coefficient

Welltower  PARKWAY LIFE

Excellent diversification

The 3 months correlation between Welltower and PARKWAY is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and PARKWAY LIFE REAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PARKWAY LIFE REAL 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 PARKWAY LIFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PARKWAY LIFE REAL has no effect on the direction of Welltower i.e., Welltower and PARKWAY LIFE go up and down completely randomly.

Pair Corralation between Welltower and PARKWAY LIFE

Assuming the 90 days horizon Welltower is expected to generate 0.58 times more return on investment than PARKWAY LIFE. However, Welltower is 1.72 times less risky than PARKWAY LIFE. It trades about 0.15 of its potential returns per unit of risk. PARKWAY LIFE REAL is currently generating about 0.04 per unit of risk. If you would invest  9,406  in Welltower on September 24, 2024 and sell it today you would earn a total of  2,414  from holding Welltower or generate 25.66% return on investment over 90 days.

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

Welltower  vs.  PARKWAY LIFE REAL

Welltower

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Welltower is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PARKWAY LIFE REAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PARKWAY LIFE REAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Welltower and PARKWAY LIFE

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

The idea behind Welltower and PARKWAY LIFE REAL 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.