Correlation Between Omega Healthcare and Sabra Healthcare

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

Diversification Opportunities for Omega Healthcare and Sabra Healthcare

0.83

Correlation Coefficient

Omega Healthcare  Sabra Healthcare

Very poor diversification

The 3 months correlation between Omega and Sabra is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors and Sabra Healthcare REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabra Healthcare REIT 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 Sabra Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabra Healthcare REIT has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and Sabra Healthcare go up and down completely randomly.

Pair Corralation between Omega Healthcare and Sabra Healthcare

Considering the 90-day investment horizon Omega Healthcare is expected to generate 1.85 times less return on investment than Sabra Healthcare. But when comparing it to its historical volatility, Omega Healthcare Investors is 1.05 times less risky than Sabra Healthcare. It trades about 0.03 of its potential returns per unit of risk. Sabra Healthcare REIT is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,673  in Sabra Healthcare REIT on December 28, 2024 and sell it today you would earn a total of  65.00  from holding Sabra Healthcare REIT or generate 3.89% return on investment over 90 days.

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

Omega Healthcare Investors  vs.  Sabra Healthcare REIT

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.

Sabra Healthcare REIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Healthcare REIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sabra Healthcare is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Omega Healthcare and Sabra Healthcare

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

The idea behind Omega Healthcare Investors and Sabra Healthcare REIT 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 Commodity Directory module to find actively traded commodities issued by global exchanges.