Correlation Between Power REIT and Omega Healthcare

Can any of the company-specific risk be diversified away by investing in both Power REIT and Omega 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 Power REIT and Omega Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Power REIT and Omega Healthcare Investors, you can compare the effects of market volatilities on Power REIT and Omega 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 Power REIT with a short position of Omega Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power REIT and Omega Healthcare.

Diversification Opportunities for Power REIT and Omega Healthcare

-0.27

Correlation Coefficient

Power REIT  Omega Healthcare

Very good diversification

The 3 months correlation between Power and Omega is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and Omega Healthcare Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omega Healthcare Inv and Power REIT 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 Power REIT are associated (or correlated) with Omega Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omega Healthcare Inv has no effect on the direction of Power REIT i.e., Power REIT and Omega Healthcare go up and down completely randomly.

Pair Corralation between Power REIT and Omega Healthcare

Allowing for the 90-day total investment horizon Power REIT is expected to generate 13.97 times more return on investment than Omega Healthcare. However, Power REIT is 13.97 times more volatile than Omega Healthcare Investors. It trades about 0.11 of its potential returns per unit of risk. Omega Healthcare Investors is currently generating about -0.21 per unit of risk. If you would invest  107.00  in Power REIT on September 25, 2024 and sell it today you would earn a total of  19.00  from holding Power REIT or generate 17.76% return on investment over 90 days.

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

Power REIT  vs.  Omega Healthcare Investors

Power REIT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Power REIT showed solid returns over the last few months and may actually be approaching a breakup point.

Omega Healthcare Inv

Risk-Adjusted Performance

0 of 100

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 fairly strong technical indicators, Omega Healthcare is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Power REIT and Omega Healthcare

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

The idea behind Power REIT and Omega Healthcare Investors 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.