Correlation Between Omega Healthcare and Spire Healthcare

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

Diversification Opportunities for Omega Healthcare and Spire Healthcare

-0.62

Correlation Coefficient

Omega Healthcare  Spire Healthcare

Excellent diversification

The 3 months correlation between Omega and Spire is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors and Spire Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Healthcare 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 Spire Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Healthcare has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and Spire Healthcare go up and down completely randomly.

Pair Corralation between Omega Healthcare and Spire Healthcare

Assuming the 90 days trading horizon Omega Healthcare Investors is expected to under-perform the Spire Healthcare. In addition to that, Omega Healthcare is 1.1 times more volatile than Spire Healthcare Group. It trades about -0.06 of its total potential returns per unit of risk. Spire Healthcare Group is currently generating about 0.21 per unit of volatility. If you would invest  22,300  in Spire Healthcare Group on October 23, 2024 and sell it today you would earn a total of  1,200  from holding Spire Healthcare Group or generate 5.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Omega Healthcare Investors  vs.  Spire Healthcare Group

Omega Healthcare Inv

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Spire Healthcare

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Healthcare Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Spire Healthcare may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Omega Healthcare and Spire Healthcare

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

The idea behind Omega Healthcare Investors and Spire Healthcare Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.