Correlation Between Welltower and American Homes
Can any of the company-specific risk be diversified away by investing in both Welltower and American Homes 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 American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Welltower and American Homes 4, you can compare the effects of market volatilities on Welltower and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Welltower and American Homes.
Diversification Opportunities for Welltower and American Homes
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Welltower and American is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Welltower i.e., Welltower and American Homes go up and down completely randomly.
Pair Corralation between Welltower and American Homes
Given the investment horizon of 90 days Welltower is expected to generate 0.99 times more return on investment than American Homes. However, Welltower is 1.01 times less risky than American Homes. It trades about 0.22 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.06 per unit of risk. If you would invest 10,296 in Welltower on August 30, 2024 and sell it today you would earn a total of 3,634 from holding Welltower or generate 35.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Welltower vs. American Homes 4
Performance |
| Timeline |
| Welltower |
| American Homes 4 |
Welltower and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Welltower and American Homes
The main advantage of trading using opposite Welltower and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Welltower position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| Welltower vs. Boston Properties | Welltower vs. Douglas Emmett | Welltower vs. Kilroy Realty Corp | Welltower vs. Highwoods Properties |
| American Homes vs. Clipper Realty | American Homes vs. UDR Inc | American Homes vs. UMH Properties | American Homes vs. Apartment Investment and |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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