Correlation Between WELL Health and European Residential

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

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

Diversification Opportunities for WELL Health and European Residential

0.81

Correlation Coefficient

WELL Health  European Residential

Very poor diversification

The 3 months correlation between WELL and European is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding WELL Health Technologies and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real and WELL Health 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 WELL Health Technologies are associated (or correlated) with European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of WELL Health i.e., WELL Health and European Residential go up and down completely randomly.

Pair Corralation between WELL Health and European Residential

Assuming the 90 days trading horizon WELL Health Technologies is expected to generate 0.96 times more return on investment than European Residential. However, WELL Health Technologies is 1.04 times less risky than European Residential. It trades about 0.4 of its potential returns per unit of risk. European Residential Real is currently generating about 0.27 per unit of risk. If you would invest  440.00  in WELL Health Technologies on September 3, 2024 and sell it today you would earn a total of  146.00  from holding WELL Health Technologies or generate 33.18% return on investment over 90 days.

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

WELL Health Technologies  vs.  European Residential Real

WELL Health Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WELL Health Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, WELL Health displayed solid returns over the last few months and may actually be approaching a breakup point.

European Residential Real

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in European Residential Real are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, European Residential sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WELL Health and European Residential

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

The idea behind WELL Health Technologies and European Residential 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.

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.