Correlation Between Omega Healthcare and DTCOM Direct

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

Diversification Opportunities for Omega Healthcare and DTCOM Direct

-0.11

Correlation Coefficient

Omega Healthcare  DTCOM Direct

Good diversification

The 3 months correlation between Omega and DTCOM is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors, and DTCOM Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTCOM Direct 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 DTCOM Direct. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTCOM Direct has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and DTCOM Direct go up and down completely randomly.

Pair Corralation between Omega Healthcare and DTCOM Direct

Assuming the 90 days trading horizon Omega Healthcare Investors, is expected to under-perform the DTCOM Direct. In addition to that, Omega Healthcare is 2.04 times more volatile than DTCOM Direct. It trades about -0.01 of its total potential returns per unit of risk. DTCOM Direct is currently generating about 0.15 per unit of volatility. If you would invest  410.00  in DTCOM Direct on October 24, 2024 and sell it today you would earn a total of  33.00  from holding DTCOM Direct or generate 8.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

Omega Healthcare Investors,  vs.  DTCOM Direct

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. 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.

DTCOM Direct

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DTCOM Direct are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, DTCOM Direct may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Omega Healthcare and DTCOM Direct

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

The idea behind Omega Healthcare Investors, and DTCOM Direct 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 Transaction History module to view history of all your transactions and understand their impact on performance.