Correlation Between New Residential and Welltower
Can any of the company-specific risk be diversified away by investing in both New Residential and Welltower 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 New Residential and Welltower into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and Welltower, you can compare the effects of market volatilities on New Residential and Welltower 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 New Residential with a short position of Welltower. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Welltower.
Diversification Opportunities for New Residential and Welltower
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between New and Welltower is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower and New Residential 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 New Residential Investment are associated (or correlated) with Welltower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welltower has no effect on the direction of New Residential i.e., New Residential and Welltower go up and down completely randomly.
Pair Corralation between New Residential and Welltower
Assuming the 90 days trading horizon New Residential Investment is expected to generate 1.27 times more return on investment than Welltower. However, New Residential is 1.27 times more volatile than Welltower. It trades about 0.37 of its potential returns per unit of risk. Welltower is currently generating about 0.35 per unit of risk. If you would invest 1,020 in New Residential Investment on October 22, 2024 and sell it today you would earn a total of 80.00 from holding New Residential Investment or generate 7.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. Welltower
Performance |
| Timeline |
| New Residential Inve |
| Welltower |
New Residential and Welltower Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Welltower
The main advantage of trading using opposite New Residential and Welltower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Welltower 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 Welltower will offset losses from the drop in Welltower's long position.| New Residential vs. COSMOSTEEL HLDGS | New Residential vs. Olympic Steel | New Residential vs. SCOTT TECHNOLOGY | New Residential vs. Tianjin Capital Environmental |
| Welltower vs. ETFS Coffee ETC | Welltower vs. Constellation Software | Welltower vs. MCEWEN MINING INC | Welltower vs. MINCO SILVER |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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