Correlation Between Stepstone and WELLTOWER

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

By analyzing existing cross correlation between Stepstone Group and WELLTOWER INC 425, you can compare the effects of market volatilities on Stepstone 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 Stepstone with a short position of WELLTOWER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and WELLTOWER.

Diversification Opportunities for Stepstone and WELLTOWER

-0.57

Correlation Coefficient

Stepstone  WELLTOWER

Excellent diversification

The 3 months correlation between Stepstone and WELLTOWER is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and WELLTOWER INC 425 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELLTOWER INC 425 and Stepstone 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 Stepstone Group 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 INC 425 has no effect on the direction of Stepstone i.e., Stepstone and WELLTOWER go up and down completely randomly.

Pair Corralation between Stepstone and WELLTOWER

Given the investment horizon of 90 days Stepstone Group is expected to generate 2.04 times more return on investment than WELLTOWER. However, Stepstone is 2.04 times more volatile than WELLTOWER INC 425. It trades about 0.14 of its potential returns per unit of risk. WELLTOWER INC 425 is currently generating about -0.02 per unit of risk. If you would invest  5,163  in Stepstone Group on September 13, 2024 and sell it today you would earn a total of  1,033  from holding Stepstone Group or generate 20.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Stepstone Group  vs.  WELLTOWER INC 425

Stepstone Group

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

WELLTOWER INC 425

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WELLTOWER INC 425 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WELLTOWER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stepstone and WELLTOWER

The main advantage of trading using opposite Stepstone and WELLTOWER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone 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 Stepstone Group and WELLTOWER INC 425 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 Anywhere module to track or share privately all of your investments from the convenience of any device.