Correlation Between Welltower and SBA Communications

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

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

Diversification Opportunities for Welltower and SBA Communications

0.81

Correlation Coefficient

Welltower  SBA Communications

Very poor diversification

The 3 months correlation between Welltower and SBA is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and SBA Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBA Communications Corp 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 SBA Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBA Communications Corp has no effect on the direction of Welltower i.e., Welltower and SBA Communications go up and down completely randomly.

Pair Corralation between Welltower and SBA Communications

Given the investment horizon of 90 days Welltower is expected to generate 0.92 times more return on investment than SBA Communications. However, Welltower is 1.09 times less risky than SBA Communications. It trades about 0.24 of its potential returns per unit of risk. SBA Communications Corp is currently generating about 0.08 per unit of risk. If you would invest  12,436  in Welltower on December 28, 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	Strong
Accuracy	100.0%
Values	Daily Returns

Welltower  vs.  SBA Communications Corp

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.

SBA Communications Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBA Communications Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, SBA Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Welltower and SBA Communications

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

The idea behind Welltower and SBA Communications Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.