Correlation Between Omega Healthcare and BP Plc

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

Diversification Opportunities for Omega Healthcare and BP Plc

0.35

Correlation Coefficient

Omega Healthcare  BP Plc

Weak diversification

The 3 months correlation between Omega and BP-B is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and BP Plc go up and down completely randomly.

Pair Corralation between Omega Healthcare and BP Plc

Assuming the 90 days trading horizon Omega Healthcare Investors is expected to generate 2.43 times more return on investment than BP Plc. However, Omega Healthcare is 2.43 times more volatile than BP plc. It trades about 0.02 of its potential returns per unit of risk. BP plc is currently generating about 0.03 per unit of risk. If you would invest  3,742  in Omega Healthcare Investors on December 21, 2024 and sell it today you would earn a total of  27.00  from holding Omega Healthcare Investors or generate 0.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Omega Healthcare Investors  vs.  BP plc

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 1 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

BP plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BP Plc 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 Omega Healthcare and BP Plc

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

The idea behind Omega Healthcare Investors and BP plc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.