Correlation Between Extra Space and Omega Healthcare

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

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

Diversification Opportunities for Extra Space and Omega Healthcare

0.12

Correlation Coefficient

Extra Space  Omega Healthcare

Average diversification

The 3 months correlation between Extra and Omega is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage 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 Extra Space 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 Extra Space Storage 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 Extra Space i.e., Extra Space and Omega Healthcare go up and down completely randomly.

Pair Corralation between Extra Space and Omega Healthcare

Assuming the 90 days trading horizon Extra Space Storage is expected to under-perform the Omega Healthcare. In addition to that, Extra Space is 1.16 times more volatile than Omega Healthcare Investors. It trades about -0.14 of its total potential returns per unit of risk. Omega Healthcare Investors is currently generating about -0.03 per unit of volatility. If you would invest  4,052  in Omega Healthcare Investors on September 18, 2024 and sell it today you would lose (126.00) from holding Omega Healthcare Investors or give up 3.11% of portfolio value over 90 days.

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

Extra Space Storage  vs.  Omega Healthcare Investors

Extra Space Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Extra Space Storage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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. 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 Extra Space and Omega Healthcare

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

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.