Correlation Between Ford and Omega Healthcare

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

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

Diversification Opportunities for Ford and Omega Healthcare

0.22

Correlation Coefficient

Ford  Omega Healthcare

Modest diversification

The 3 months correlation between Ford and Omega is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Omega Healthcare go up and down completely randomly.

Pair Corralation between Ford and Omega Healthcare

Taking into account the 90-day investment horizon Ford is expected to generate 1.31 times less return on investment than Omega Healthcare. In addition to that, Ford is 1.57 times more volatile than Omega Healthcare Investors. It trades about 0.02 of its total potential returns per unit of risk. Omega Healthcare Investors is currently generating about 0.04 per unit of volatility. If you would invest  2,389  in Omega Healthcare Investors on February 11, 2024 and sell it today you would earn a total of  680.00  from holding Omega Healthcare Investors or generate 28.46% return on investment over 90 days.

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

Ford Motor  vs.  Omega Healthcare Investors

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Omega Healthcare Inv

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Omega Healthcare Investors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Omega Healthcare is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ford and Omega Healthcare

The main advantage of trading using opposite Ford and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.