Correlation Between Welltower and National Retail

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

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

Diversification Opportunities for Welltower and National Retail

0.78

Correlation Coefficient

Welltower  National Retail

Poor diversification

The 3 months correlation between Welltower and National is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and National Retail Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Retail Prop 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 National Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Retail Prop has no effect on the direction of Welltower i.e., Welltower and National Retail go up and down completely randomly.

Pair Corralation between Welltower and National Retail

Given the investment horizon of 90 days Welltower is expected to generate 1.04 times more return on investment than National Retail. However, Welltower is 1.04 times more volatile than National Retail Properties. It trades about 0.24 of its potential returns per unit of risk. National Retail Properties is currently generating about 0.07 per unit of risk. If you would invest  12,436  in Welltower on December 30, 2024 and sell it today you would earn a total of  2,906  from holding Welltower or generate 23.37% return on investment over 90 days.

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

Welltower  vs.  National Retail Properties

Welltower

Risk-Adjusted Performance

Solid

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

National Retail Prop

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Retail Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, National Retail may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Welltower and National Retail

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

The idea behind Welltower and National Retail 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.