Correlation Between Visa and Omega Healthcare

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

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

Diversification Opportunities for Visa and Omega Healthcare

0.09

Correlation Coefficient

Visa  Omega Healthcare

Significant diversification

The 3 months correlation between Visa and Omega is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and Omega Healthcare go up and down completely randomly.

Pair Corralation between Visa and Omega Healthcare

Taking into account the 90-day investment horizon Visa is expected to generate 1.21 times less return on investment than Omega Healthcare. But when comparing it to its historical volatility, Visa Class A is 1.07 times less risky than Omega Healthcare. It trades about 0.11 of its potential returns per unit of risk. Omega Healthcare Investors is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,002  in Omega Healthcare Investors on February 11, 2024 and sell it today you would earn a total of  67.00  from holding Omega Healthcare Investors or generate 2.23% return on investment over 90 days.

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

Visa Class A  vs.  Omega Healthcare Investors

Visa Class A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 Visa and Omega Healthcare

The main advantage of trading using opposite Visa and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.