Correlation Between Omega Healthcare and Alphabet

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

Diversification Opportunities for Omega Healthcare and Alphabet

0.84

Correlation Coefficient

Omega Healthcare  Alphabet

Very poor diversification

The 3 months correlation between Omega and Alphabet is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors, and Alphabet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and Alphabet go up and down completely randomly.

Pair Corralation between Omega Healthcare and Alphabet

Assuming the 90 days trading horizon Omega Healthcare Investors, is expected to generate 0.81 times more return on investment than Alphabet. However, Omega Healthcare Investors, is 1.24 times less risky than Alphabet. It trades about -0.08 of its potential returns per unit of risk. Alphabet is currently generating about -0.2 per unit of risk. If you would invest  7,793  in Omega Healthcare Investors, on December 25, 2024 and sell it today you would lose (583.00) from holding Omega Healthcare Investors, or give up 7.48% of portfolio value over 90 days.

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

Omega Healthcare Investors,  vs.  Alphabet

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.

Alphabet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Omega Healthcare and Alphabet

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

The idea behind Omega Healthcare Investors, and Alphabet 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.