Correlation Between Omega Healthcare and Tungsten West

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

Diversification Opportunities for Omega Healthcare and Tungsten West

-0.48

Correlation Coefficient

Omega Healthcare  Tungsten West

Very good diversification

The 3 months correlation between Omega and Tungsten is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors and Tungsten West PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tungsten West 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 Tungsten West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tungsten West PLC has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and Tungsten West go up and down completely randomly.

Pair Corralation between Omega Healthcare and Tungsten West

Assuming the 90 days trading horizon Omega Healthcare Investors is expected to under-perform the Tungsten West. But the stock apears to be less risky and, when comparing its historical volatility, Omega Healthcare Investors is 5.09 times less risky than Tungsten West. The stock trades about -0.02 of its potential returns per unit of risk. The Tungsten West PLC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  275.00  in Tungsten West PLC on October 6, 2024 and sell it today you would earn a total of  135.00  from holding Tungsten West PLC or generate 49.09% return on investment over 90 days.

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

Omega Healthcare Investors  vs.  Tungsten West PLC

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 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.

Tungsten West PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tungsten West PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Tungsten West exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Omega Healthcare and Tungsten West

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

The idea behind Omega Healthcare Investors and Tungsten West 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.