Correlation Between Omega Healthcare and Wix

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

Diversification Opportunities for Omega Healthcare and Wix

0.51

Correlation Coefficient

Omega Healthcare  Wix

Very weak diversification

The 3 months correlation between Omega and Wix is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors, and Wix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wix 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 Wix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wix has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and Wix go up and down completely randomly.

Pair Corralation between Omega Healthcare and Wix

Assuming the 90 days trading horizon Omega Healthcare is expected to generate 8.47 times less return on investment than Wix. But when comparing it to its historical volatility, Omega Healthcare Investors, is 3.4 times less risky than Wix. It trades about 0.09 of its potential returns per unit of risk. Wix is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,185  in Wix on October 7, 2024 and sell it today you would earn a total of  1,366  from holding Wix or generate 42.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.37%
Values	Daily Returns

Omega Healthcare Investors,  vs.  Wix

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.

Wix

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wix are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Wix sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Omega Healthcare and Wix

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

The idea behind Omega Healthcare Investors, and Wix 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.