Correlation Between Welltower and LXP Industrial

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

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

Diversification Opportunities for Welltower and LXP Industrial

0.33

Correlation Coefficient

Welltower  LXP Industrial

Weak diversification

The 3 months correlation between Welltower and LXP is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and LXP Industrial Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LXP Industrial 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 LXP Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LXP Industrial Trust has no effect on the direction of Welltower i.e., Welltower and LXP Industrial go up and down completely randomly.

Pair Corralation between Welltower and LXP Industrial

Given the investment horizon of 90 days Welltower is expected to generate 0.86 times more return on investment than LXP Industrial. However, Welltower is 1.16 times less risky than LXP Industrial. It trades about 0.13 of its potential returns per unit of risk. LXP Industrial Trust is currently generating about -0.05 per unit of risk. If you would invest  13,757  in Welltower on November 28, 2024 and sell it today you would earn a total of  1,417  from holding Welltower or generate 10.3% return on investment over 90 days.

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

Welltower  vs.  LXP Industrial Trust

Welltower

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Welltower may actually be approaching a critical reversion point that can send shares even higher in March 2025.

LXP Industrial Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days LXP Industrial Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, LXP Industrial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Welltower and LXP Industrial

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

The idea behind Welltower and LXP Industrial 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.