Correlation Between Office Properties and Welltower

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

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

Diversification Opportunities for Office Properties and Welltower

-0.13

Correlation Coefficient

Office Properties  Welltower

Good diversification

The 3 months correlation between Office and Welltower is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower and Office 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 Office Properties Income 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 Office Properties i.e., Office Properties and Welltower go up and down completely randomly.

Pair Corralation between Office Properties and Welltower

Considering the 90-day investment horizon Office Properties Income is expected to under-perform the Welltower. In addition to that, Office Properties is 2.53 times more volatile than Welltower. It trades about -0.29 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

Office Properties Income  vs.  Welltower

Office Properties Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Office Properties Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 Office Properties and Welltower

The main advantage of trading using opposite Office Properties and Welltower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Office 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 Office Properties Income 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.