Correlation Between United Rentals and Omega Healthcare

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

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

Diversification Opportunities for United Rentals and Omega Healthcare

0.4

Correlation Coefficient

United Rentals  Omega Healthcare

Very weak diversification

The 3 months correlation between United and Omega is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals 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 United Rentals 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 United Rentals 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 United Rentals i.e., United Rentals and Omega Healthcare go up and down completely randomly.

Pair Corralation between United Rentals and Omega Healthcare

Assuming the 90 days trading horizon United Rentals is expected to generate 1.33 times less return on investment than Omega Healthcare. In addition to that, United Rentals is 1.75 times more volatile than Omega Healthcare Investors,. It trades about 0.05 of its total potential returns per unit of risk. Omega Healthcare Investors, is currently generating about 0.12 per unit of volatility. If you would invest  5,937  in Omega Healthcare Investors, on October 22, 2024 and sell it today you would earn a total of  1,687  from holding Omega Healthcare Investors, or generate 28.42% return on investment over 90 days.

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

United Rentals  vs.  Omega Healthcare Investors,

United Rentals

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days United Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, United Rentals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 somewhat strong technical indicators, Omega Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and Omega Healthcare

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