Correlation Between HCA Healthcare and Omega Healthcare

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

By analyzing existing cross correlation between HCA Healthcare and Omega Healthcare Investors, you can compare the effects of market volatilities on HCA Healthcare and Omega Healthcare 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 HCA Healthcare with a short position of Omega Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCA Healthcare and Omega Healthcare.

Diversification Opportunities for HCA Healthcare and Omega Healthcare

-0.27

Correlation Coefficient

HCA Healthcare  Omega Healthcare

Very good diversification

The 3 months correlation between HCA and Omega is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding HCA Healthcare and Omega Healthcare Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omega Healthcare Inv and HCA Healthcare 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 HCA Healthcare are associated (or correlated) with Omega Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omega Healthcare Inv has no effect on the direction of HCA Healthcare i.e., HCA Healthcare and Omega Healthcare go up and down completely randomly.

Pair Corralation between HCA Healthcare and Omega Healthcare

Assuming the 90 days trading horizon HCA Healthcare is expected to under-perform the Omega Healthcare. In addition to that, HCA Healthcare is 1.52 times more volatile than Omega Healthcare Investors. It trades about -0.14 of its total potential returns per unit of risk. Omega Healthcare Investors is currently generating about 0.05 per unit of volatility. If you would invest  3,934  in Omega Healthcare Investors on August 31, 2024 and sell it today you would earn a total of  146.00  from holding Omega Healthcare Investors or generate 3.71% return on investment over 90 days.

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

HCA Healthcare  vs.  Omega Healthcare Investors

HCA Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCA Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Omega Healthcare Inv

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Omega Healthcare Investors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Omega Healthcare is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HCA Healthcare and Omega Healthcare

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

The idea behind HCA Healthcare and Omega Healthcare Investors 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 Global Correlations module to find global opportunities by holding instruments from different markets.