Correlation Between Ventas and Boston Properties

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

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

Diversification Opportunities for Ventas and Boston Properties

-0.69

Correlation Coefficient

Ventas  Boston Properties

Excellent diversification

The 3 months correlation between Ventas and Boston is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ventas Inc and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and Ventas 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 Ventas Inc are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of Ventas i.e., Ventas and Boston Properties go up and down completely randomly.

Pair Corralation between Ventas and Boston Properties

Considering the 90-day investment horizon Ventas Inc is expected to generate 0.87 times more return on investment than Boston Properties. However, Ventas Inc is 1.16 times less risky than Boston Properties. It trades about 0.16 of its potential returns per unit of risk. Boston Properties is currently generating about -0.05 per unit of risk. If you would invest  5,806  in Ventas Inc on December 28, 2024 and sell it today you would earn a total of  987.00  from holding Ventas Inc or generate 17.0% return on investment over 90 days.

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

Ventas Inc  vs.  Boston Properties

Ventas Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ventas Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ventas reported solid returns over the last few months and may actually be approaching a breakup point.

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 relatively invariable basic indicators, Boston Properties is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ventas and Boston Properties

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

The idea behind Ventas Inc and Boston Properties 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.