Correlation Between Omega Healthcare and LTC Properties

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

Diversification Opportunities for Omega Healthcare and LTC Properties

0.9

Correlation Coefficient

Omega Healthcare  LTC Properties

Almost no diversification

The 3 months correlation between Omega and LTC is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors and LTC Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LTC Properties 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 LTC Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LTC Properties has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and LTC Properties go up and down completely randomly.

Pair Corralation between Omega Healthcare and LTC Properties

Considering the 90-day investment horizon Omega Healthcare Investors is expected to generate 1.58 times more return on investment than LTC Properties. However, Omega Healthcare is 1.58 times more volatile than LTC Properties. It trades about 0.02 of its potential returns per unit of risk. LTC Properties is currently generating about 0.02 per unit of risk. If you would invest  3,697  in Omega Healthcare Investors on November 29, 2024 and sell it today you would earn a total of  15.00  from holding Omega Healthcare Investors or generate 0.41% return on investment over 90 days.

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

Omega Healthcare Investors  vs.  LTC Properties

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 unsteady performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

LTC Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days LTC Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Omega Healthcare and LTC Properties

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

The idea behind Omega Healthcare Investors and LTC Properties 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.