Correlation Between Amazon and Omega Healthcare

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

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

Diversification Opportunities for Amazon and Omega Healthcare

0.41

Correlation Coefficient

Amazon  Omega Healthcare

Very weak diversification

The 3 months correlation between Amazon and Omega is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Omega Healthcare Investors, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omega Healthcare Inv and Amazon 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 Amazon Inc are associated (or correlated) with Omega Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omega Healthcare Inv has no effect on the direction of Amazon i.e., Amazon and Omega Healthcare go up and down completely randomly.

Pair Corralation between Amazon and Omega Healthcare

Assuming the 90 days trading horizon Amazon Inc is expected to under-perform the Omega Healthcare. In addition to that, Amazon is 1.02 times more volatile than Omega Healthcare Investors,. It trades about -0.2 of its total potential returns per unit of risk. Omega Healthcare Investors, is currently generating about -0.12 per unit of volatility. If you would invest  7,793  in Omega Healthcare Investors, on December 25, 2024 and sell it today you would lose (716.00) from holding Omega Healthcare Investors, or give up 9.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.14%
Values	Daily Returns

Amazon Inc  vs.  Omega Healthcare Investors,

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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. Despite latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Amazon and Omega Healthcare

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

The idea behind Amazon Inc and Omega Healthcare Investors, 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.