Correlation Between Omega Healthcare and Public Storage

Can any of the company-specific risk be diversified away by investing in both Omega Healthcare and Public Storage 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 Public Storage 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 Public Storage, you can compare the effects of market volatilities on Omega Healthcare and Public Storage 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 Public Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omega Healthcare and Public Storage.

Diversification Opportunities for Omega Healthcare and Public Storage

0.07

Correlation Coefficient

Omega Healthcare  Public Storage

Significant diversification

The 3 months correlation between Omega and Public is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors and Public Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Storage 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 Public Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Storage has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and Public Storage go up and down completely randomly.

Pair Corralation between Omega Healthcare and Public Storage

Assuming the 90 days trading horizon Omega Healthcare Investors is expected to generate 1.41 times more return on investment than Public Storage. However, Omega Healthcare is 1.41 times more volatile than Public Storage. It trades about 0.03 of its potential returns per unit of risk. Public Storage is currently generating about 0.01 per unit of risk. If you would invest  3,670  in Omega Healthcare Investors on December 30, 2024 and sell it today you would earn a total of  93.00  from holding Omega Healthcare Investors or generate 2.53% return on investment over 90 days.

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

Omega Healthcare Investors  vs.  Public Storage

Omega Healthcare Inv

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Omega Healthcare Investors are ranked lower than 2 (%) 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.

Public Storage

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Omega Healthcare and Public Storage

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

The idea behind Omega Healthcare Investors and Public Storage 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.