Correlation Between Eastman Chemical and Omega Healthcare

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

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

Diversification Opportunities for Eastman Chemical and Omega Healthcare

-0.83

Correlation Coefficient

Eastman Chemical  Omega Healthcare

Pay attention - limited upside

The 3 months correlation between Eastman and Omega is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical 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 Eastman Chemical 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 Eastman Chemical 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 Eastman Chemical i.e., Eastman Chemical and Omega Healthcare go up and down completely randomly.

Pair Corralation between Eastman Chemical and Omega Healthcare

Assuming the 90 days trading horizon Eastman Chemical is expected to generate 0.42 times more return on investment than Omega Healthcare. However, Eastman Chemical is 2.39 times less risky than Omega Healthcare. It trades about 0.1 of its potential returns per unit of risk. Omega Healthcare Investors, is currently generating about -0.12 per unit of risk. If you would invest  27,379  in Eastman Chemical on December 25, 2024 and sell it today you would earn a total of  1,034  from holding Eastman Chemical or generate 3.78% return on investment over 90 days.

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

Eastman Chemical  vs.  Omega Healthcare Investors,

Eastman Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Eastman Chemical 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

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 Eastman Chemical and Omega Healthcare

The main advantage of trading using opposite Eastman Chemical and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical 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 Eastman Chemical 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.