Correlation Between Omega Healthcare and Netflix

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

Diversification Opportunities for Omega Healthcare and Netflix

0.34

Correlation Coefficient

Omega Healthcare  Netflix

Weak diversification

The 3 months correlation between Omega and Netflix is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors, and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix 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 Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and Netflix go up and down completely randomly.

Pair Corralation between Omega Healthcare and Netflix

Assuming the 90 days trading horizon Omega Healthcare Investors, is expected to under-perform the Netflix. But the stock apears to be less risky and, when comparing its historical volatility, Omega Healthcare Investors, is 1.06 times less risky than Netflix. The stock trades about -0.01 of its potential returns per unit of risk. The Netflix is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  8,526  in Netflix on October 24, 2024 and sell it today you would earn a total of  2,924  from holding Netflix or generate 34.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.61%
Values	Daily Returns

Omega Healthcare Investors,  vs.  Netflix

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.

Netflix

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Netflix sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Omega Healthcare and Netflix

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

The idea behind Omega Healthcare Investors, and Netflix 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.