Correlation Between Omega Healthcare and Synchrony Financial

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

Diversification Opportunities for Omega Healthcare and Synchrony Financial

0.37

Correlation Coefficient

Omega Healthcare  Synchrony Financial

Weak diversification

The 3 months correlation between Omega and Synchrony is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors, and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial 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 Synchrony Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synchrony Financial has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and Synchrony Financial go up and down completely randomly.

Pair Corralation between Omega Healthcare and Synchrony Financial

Assuming the 90 days trading horizon Omega Healthcare is expected to generate 1.51 times less return on investment than Synchrony Financial. But when comparing it to its historical volatility, Omega Healthcare Investors, is 1.01 times less risky than Synchrony Financial. It trades about 0.06 of its potential returns per unit of risk. Synchrony Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  16,418  in Synchrony Financial on October 10, 2024 and sell it today you would earn a total of  24,400  from holding Synchrony Financial or generate 148.62% return on investment over 90 days.

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

Omega Healthcare Investors,  vs.  Synchrony Financial

Omega Healthcare Inv

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Omega Healthcare Investors, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Synchrony Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Synchrony Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Omega Healthcare and Synchrony Financial

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

The idea behind Omega Healthcare Investors, and Synchrony Financial 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.