Correlation Between Omega Healthcare and United Internet

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

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

Diversification Opportunities for Omega Healthcare and United Internet

0.22

Correlation Coefficient

Omega Healthcare  United Internet

Modest diversification

The 3 months correlation between Omega and United is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors and United Internet AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Internet AG and Omega 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 Omega Healthcare Investors are associated (or correlated) with United Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Internet AG has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and United Internet go up and down completely randomly.

Pair Corralation between Omega Healthcare and United Internet

Assuming the 90 days trading horizon Omega Healthcare is expected to generate 22.09 times less return on investment than United Internet. But when comparing it to its historical volatility, Omega Healthcare Investors is 1.11 times less risky than United Internet. It trades about 0.01 of its potential returns per unit of risk. United Internet AG is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,505  in United Internet AG on December 24, 2024 and sell it today you would earn a total of  409.00  from holding United Internet AG or generate 27.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Omega Healthcare Investors  vs.  United Internet AG

Omega Healthcare Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Omega Healthcare Investors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Omega Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

United Internet AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Internet AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United Internet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Omega Healthcare and United Internet

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

The idea behind Omega Healthcare Investors and United Internet AG 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.