Correlation Between Welltower and Acadia Realty

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

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

Diversification Opportunities for Welltower and Acadia Realty

0.72

Correlation Coefficient

Welltower  Acadia Realty

Poor diversification

The 3 months correlation between Welltower and Acadia is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and Acadia Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Realty Trust 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 Acadia Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadia Realty Trust has no effect on the direction of Welltower i.e., Welltower and Acadia Realty go up and down completely randomly.

Pair Corralation between Welltower and Acadia Realty

Given the investment horizon of 90 days Welltower is expected to under-perform the Acadia Realty. But the stock apears to be less risky and, when comparing its historical volatility, Welltower is 1.25 times less risky than Acadia Realty. The stock trades about -0.26 of its potential returns per unit of risk. The Acadia Realty Trust is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  2,514  in Acadia Realty Trust on October 4, 2024 and sell it today you would lose (98.00) from holding Acadia Realty Trust or give up 3.9% of portfolio value over 90 days.

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

Welltower  vs.  Acadia Realty Trust

Welltower

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Welltower is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Acadia Realty Trust

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Acadia Realty Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Acadia Realty is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Welltower and Acadia Realty

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

The idea behind Welltower and Acadia Realty Trust 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 Global Correlations module to find global opportunities by holding instruments from different markets.