Correlation Between Omega Healthcare and EOG Resources

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

Diversification Opportunities for Omega Healthcare and EOG Resources

0.33

Correlation Coefficient

Omega Healthcare  EOG Resources

Weak diversification

The 3 months correlation between Omega and EOG is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors, and EOG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOG Resources 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 EOG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOG Resources has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and EOG Resources go up and down completely randomly.

Pair Corralation between Omega Healthcare and EOG Resources

Assuming the 90 days trading horizon Omega Healthcare Investors, is expected to generate 0.94 times more return on investment than EOG Resources. However, Omega Healthcare Investors, is 1.06 times less risky than EOG Resources. It trades about 0.06 of its potential returns per unit of risk. EOG Resources is currently generating about 0.02 per unit of risk. If you would invest  4,270  in Omega Healthcare Investors, on October 4, 2024 and sell it today you would earn a total of  3,507  from holding Omega Healthcare Investors, or generate 82.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	79.63%
Values	Daily Returns

Omega Healthcare Investors,  vs.  EOG Resources

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.

EOG Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EOG Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Omega Healthcare and EOG Resources

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

The idea behind Omega Healthcare Investors, and EOG Resources 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..