Correlation Between Omega Healthcare and PennyMac Mortgage

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

Diversification Opportunities for Omega Healthcare and PennyMac Mortgage

0.28

Correlation Coefficient

Omega Healthcare  PennyMac Mortgage

Modest diversification

The 3 months correlation between Omega and PennyMac is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors and PennyMac Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennyMac Mortgage 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 PennyMac Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennyMac Mortgage has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and PennyMac Mortgage go up and down completely randomly.

Pair Corralation between Omega Healthcare and PennyMac Mortgage

Considering the 90-day investment horizon Omega Healthcare is expected to generate 7.03 times less return on investment than PennyMac Mortgage. In addition to that, Omega Healthcare is 1.2 times more volatile than PennyMac Mortgage Investment. It trades about 0.03 of its total potential returns per unit of risk. PennyMac Mortgage Investment is currently generating about 0.22 per unit of volatility. If you would invest  1,244  in PennyMac Mortgage Investment on December 28, 2024 and sell it today you would earn a total of  233.00  from holding PennyMac Mortgage Investment or generate 18.73% 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.  PennyMac Mortgage Investment

Omega Healthcare Inv

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Omega Healthcare Investors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Omega Healthcare is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

PennyMac Mortgage

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PennyMac Mortgage Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, PennyMac Mortgage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Omega Healthcare and PennyMac Mortgage

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

The idea behind Omega Healthcare Investors and PennyMac Mortgage Investment 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.