Correlation Between Omega Healthcare and Hormel Foods

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

Diversification Opportunities for Omega Healthcare and Hormel Foods

0.49

Correlation Coefficient

Omega Healthcare  Hormel Foods

Very weak diversification

The 3 months correlation between Omega and Hormel is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors, and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods 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 Hormel Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hormel Foods has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and Hormel Foods go up and down completely randomly.

Pair Corralation between Omega Healthcare and Hormel Foods

Assuming the 90 days trading horizon Omega Healthcare is expected to generate 1.94 times less return on investment than Hormel Foods. In addition to that, Omega Healthcare is 1.9 times more volatile than Hormel Foods. It trades about 0.07 of its total potential returns per unit of risk. Hormel Foods is currently generating about 0.27 per unit of volatility. If you would invest  16,996  in Hormel Foods on October 7, 2024 and sell it today you would earn a total of  2,704  from holding Hormel Foods or generate 15.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Omega Healthcare Investors,  vs.  Hormel Foods

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.

Hormel Foods

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Hormel Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Omega Healthcare and Hormel Foods

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

The idea behind Omega Healthcare Investors, and Hormel Foods 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.