Correlation Between Omega Healthcare and GEO

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

Diversification Opportunities for Omega Healthcare and GEO

0.58

Correlation Coefficient

Omega Healthcare  GEO

Very weak diversification

The 3 months correlation between Omega and GEO is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors and The GEO Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEO Group 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 GEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEO Group has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and GEO go up and down completely randomly.

Pair Corralation between Omega Healthcare and GEO

Assuming the 90 days horizon Omega Healthcare is expected to generate 4.46 times less return on investment than GEO. But when comparing it to its historical volatility, Omega Healthcare Investors is 3.46 times less risky than GEO. It trades about 0.11 of its potential returns per unit of risk. The GEO Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,232  in The GEO Group on September 24, 2024 and sell it today you would earn a total of  1,395  from holding The GEO Group or generate 113.23% return on investment over 90 days.

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

Omega Healthcare Investors  vs.  The GEO Group

Omega Healthcare Inv

Risk-Adjusted Performance

1 of 100

Very 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. Despite nearly stable basic indicators, Omega Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GEO Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The GEO Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GEO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Omega Healthcare and GEO

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

The idea behind Omega Healthcare Investors and The GEO Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.