Correlation Between Clover Health and Omega Healthcare

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

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

Diversification Opportunities for Clover Health and Omega Healthcare

0.15

Correlation Coefficient

Clover Health  Omega Healthcare

Average diversification

The 3 months correlation between Clover and Omega is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Clover Health Investments, 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 Clover Health 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 Clover Health Investments, 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 Clover Health i.e., Clover Health and Omega Healthcare go up and down completely randomly.

Pair Corralation between Clover Health and Omega Healthcare

Assuming the 90 days trading horizon Clover Health is expected to generate 3.7 times less return on investment than Omega Healthcare. In addition to that, Clover Health is 2.05 times more volatile than Omega Healthcare Investors,. It trades about 0.01 of its total potential returns per unit of risk. Omega Healthcare Investors, is currently generating about 0.07 per unit of volatility. If you would invest  7,276  in Omega Healthcare Investors, on October 8, 2024 and sell it today you would earn a total of  514.00  from holding Omega Healthcare Investors, or generate 7.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Clover Health Investments,  vs.  Omega Healthcare Investors,

Clover Health Invest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clover Health Investments, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Clover Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Omega Healthcare Inv

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Omega Healthcare Investors, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Omega Healthcare may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Clover Health and Omega Healthcare

The main advantage of trading using opposite Clover Health and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clover Health 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 Clover Health Investments, 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.

Check out your portfolio center.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.