Correlation Between Welltower and Prudential Real

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

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

Diversification Opportunities for Welltower and Prudential Real

0.62

Correlation Coefficient

Welltower  Prudential Real

Poor diversification

The 3 months correlation between Welltower and Prudential is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and Prudential Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Real Estate 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 Prudential Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Real Estate has no effect on the direction of Welltower i.e., Welltower and Prudential Real go up and down completely randomly.

Pair Corralation between Welltower and Prudential Real

Given the investment horizon of 90 days Welltower is expected to under-perform the Prudential Real. But the stock apears to be less risky and, when comparing its historical volatility, Welltower is 1.08 times less risky than Prudential Real. The stock trades about -0.4 of its potential returns per unit of risk. The Prudential Real Estate is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest  1,670  in Prudential Real Estate on September 27, 2024 and sell it today you would lose (117.00) from holding Prudential Real Estate or give up 7.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Welltower  vs.  Prudential Real Estate

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.

Prudential Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Welltower and Prudential Real

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

The idea behind Welltower and Prudential Real Estate 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.