Correlation Between Rockwood Realisation and Omega Healthcare

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

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

Diversification Opportunities for Rockwood Realisation and Omega Healthcare

0.31

Correlation Coefficient

Rockwood Realisation  Omega Healthcare

Weak diversification

The 3 months correlation between Rockwood and Omega is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Rockwood Realisation PLC 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 Rockwood Realisation 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 Rockwood Realisation PLC 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 Rockwood Realisation i.e., Rockwood Realisation and Omega Healthcare go up and down completely randomly.

Pair Corralation between Rockwood Realisation and Omega Healthcare

Assuming the 90 days trading horizon Rockwood Realisation PLC is expected to generate 0.59 times more return on investment than Omega Healthcare. However, Rockwood Realisation PLC is 1.71 times less risky than Omega Healthcare. It trades about 0.22 of its potential returns per unit of risk. Omega Healthcare Investors is currently generating about -0.15 per unit of risk. If you would invest  25,600  in Rockwood Realisation PLC on September 16, 2024 and sell it today you would earn a total of  600.00  from holding Rockwood Realisation PLC or generate 2.34% return on investment over 90 days.

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

Rockwood Realisation PLC  vs.  Omega Healthcare Investors

Rockwood Realisation PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rockwood Realisation PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Rockwood Realisation is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. 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 Rockwood Realisation and Omega Healthcare

The main advantage of trading using opposite Rockwood Realisation and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rockwood Realisation 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 Rockwood Realisation PLC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.