Correlation Between Welltower and Community Healthcare

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

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

Diversification Opportunities for Welltower and Community Healthcare

0.66

Correlation Coefficient

Welltower  Community Healthcare

Poor diversification

The 3 months correlation between Welltower and Community is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and Community Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Healthcare 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 Community Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Healthcare has no effect on the direction of Welltower i.e., Welltower and Community Healthcare go up and down completely randomly.

Pair Corralation between Welltower and Community Healthcare

Given the investment horizon of 90 days Welltower is expected to generate 0.55 times more return on investment than Community Healthcare. However, Welltower is 1.81 times less risky than Community Healthcare. It trades about 0.12 of its potential returns per unit of risk. Community Healthcare Trust is currently generating about -0.05 per unit of risk. If you would invest  7,843  in Welltower on September 28, 2024 and sell it today you would earn a total of  4,665  from holding Welltower or generate 59.48% return on investment over 90 days.

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

Welltower  vs.  Community Healthcare Trust

Welltower

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Welltower has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Welltower is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Community Healthcare

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Community Healthcare Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Community Healthcare is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Welltower and Community Healthcare

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

The idea behind Welltower and Community Healthcare 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.