Correlation Between Reliance Industries and Omega Healthcare

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

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

Diversification Opportunities for Reliance Industries and Omega Healthcare

0.26

Correlation Coefficient

Reliance Industries  Omega Healthcare

Modest diversification

The 3 months correlation between Reliance and Omega is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd 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 Reliance Industries 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 Reliance Industries Ltd 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 Reliance Industries i.e., Reliance Industries and Omega Healthcare go up and down completely randomly.

Pair Corralation between Reliance Industries and Omega Healthcare

Assuming the 90 days trading horizon Reliance Industries Ltd is expected to generate 0.8 times more return on investment than Omega Healthcare. However, Reliance Industries Ltd is 1.25 times less risky than Omega Healthcare. It trades about 0.05 of its potential returns per unit of risk. Omega Healthcare Investors is currently generating about 0.02 per unit of risk. If you would invest  5,680  in Reliance Industries Ltd on December 31, 2024 and sell it today you would earn a total of  210.00  from holding Reliance Industries Ltd or generate 3.7% return on investment over 90 days.

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

Reliance Industries Ltd  vs.  Omega Healthcare Investors

Reliance Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Industries Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Reliance Industries is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Omega Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Reliance Industries and Omega Healthcare

The main advantage of trading using opposite Reliance Industries and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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 Reliance Industries Ltd 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.