Correlation Between Welltower and Terreno Realty

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

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

Diversification Opportunities for Welltower and Terreno Realty

-0.71

Correlation Coefficient

Welltower  Terreno Realty

Pay attention - limited upside

The 3 months correlation between Welltower and Terreno is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Welltower and Terreno Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terreno Realty 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 Terreno Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terreno Realty has no effect on the direction of Welltower i.e., Welltower and Terreno Realty go up and down completely randomly.

Pair Corralation between Welltower and Terreno Realty

Given the investment horizon of 90 days Welltower is expected to generate 0.88 times more return on investment than Terreno Realty. However, Welltower is 1.14 times less risky than Terreno Realty. It trades about 0.14 of its potential returns per unit of risk. Terreno Realty is currently generating about -0.08 per unit of risk. If you would invest  12,861  in Welltower on August 16, 2024 and sell it today you would earn a total of  634.00  from holding Welltower or generate 4.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Welltower  vs.  Terreno Realty

Welltower

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Welltower disclosed solid returns over the last few months and may actually be approaching a breakup point.

Terreno Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terreno Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Welltower and Terreno Realty

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

The idea behind Welltower and Terreno Realty 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.