Correlation Between Power REIT and Welltower

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Can any of the company-specific risk be diversified away by investing in both Power REIT 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 Power REIT and Welltower into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power REIT and Welltower, you can compare the effects of market volatilities on Power REIT 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 Power REIT with a short position of Welltower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power REIT and Welltower.

Diversification Opportunities for Power REIT and Welltower

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between Power and Welltower is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower and Power REIT 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 Power REIT 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 Power REIT i.e., Power REIT and Welltower go up and down completely randomly.

Pair Corralation between Power REIT and Welltower

Allowing for the 90-day total investment horizon Power REIT is expected to generate 10.34 times more return on investment than Welltower. However, Power REIT is 10.34 times more volatile than Welltower. It trades about 0.07 of its potential returns per unit of risk. Welltower is currently generating about 0.17 per unit of risk. If you would invest  61.00  in Power REIT on August 26, 2024 and sell it today you would earn a total of  44.00  from holding Power REIT or generate 72.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Power REIT  vs.  Welltower

 Performance 
       Timeline  
Power REIT 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days Power REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Power REIT may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Welltower 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Welltower disclosed solid returns over the last few months and may actually be approaching a breakup point.

Power REIT and Welltower Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Power REIT and Welltower

The main advantage of trading using opposite Power REIT and Welltower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power REIT 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.
The idea behind Power REIT and Welltower 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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