Correlation Between Charter Communications and Omega Healthcare

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

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

Diversification Opportunities for Charter Communications and Omega Healthcare

0.6

Correlation Coefficient

Charter Communications  Omega Healthcare

Poor diversification

The 3 months correlation between Charter and Omega is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications 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 Charter Communications 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 Charter Communications 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 Charter Communications i.e., Charter Communications and Omega Healthcare go up and down completely randomly.

Pair Corralation between Charter Communications and Omega Healthcare

Assuming the 90 days trading horizon Charter Communications is expected to generate 3.48 times less return on investment than Omega Healthcare. In addition to that, Charter Communications is 1.02 times more volatile than Omega Healthcare Investors,. It trades about 0.02 of its total potential returns per unit of risk. Omega Healthcare Investors, is currently generating about 0.06 per unit of volatility. If you would invest  4,230  in Omega Healthcare Investors, on October 10, 2024 and sell it today you would earn a total of  3,320  from holding Omega Healthcare Investors, or generate 78.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.94%
Values	Daily Returns

Charter Communications  vs.  Omega Healthcare Investors,

Charter Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Charter Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Omega Healthcare Inv

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Omega Healthcare Investors, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Omega Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Charter Communications and Omega Healthcare

The main advantage of trading using opposite Charter Communications and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications 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 Charter Communications 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.