Correlation Between Target Healthcare and Omega Healthcare

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

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

Diversification Opportunities for Target Healthcare and Omega Healthcare

0.21

Correlation Coefficient

Target Healthcare  Omega Healthcare

Modest diversification

The 3 months correlation between Target and Omega is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Target Healthcare REIT 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 Target 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 Target Healthcare REIT 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 Target Healthcare i.e., Target Healthcare and Omega Healthcare go up and down completely randomly.

Pair Corralation between Target Healthcare and Omega Healthcare

Assuming the 90 days trading horizon Target Healthcare REIT is expected to generate 0.94 times more return on investment than Omega Healthcare. However, Target Healthcare REIT is 1.06 times less risky than Omega Healthcare. It trades about 0.03 of its potential returns per unit of risk. Omega Healthcare Investors is currently generating about 0.01 per unit of risk. If you would invest  8,293  in Target Healthcare REIT on September 5, 2024 and sell it today you would earn a total of  167.00  from holding Target Healthcare REIT or generate 2.01% return on investment over 90 days.

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

Target Healthcare REIT  vs.  Omega Healthcare Investors

Target Healthcare REIT

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Target Healthcare REIT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Target Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the 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 Target Healthcare and Omega Healthcare

The main advantage of trading using opposite Target Healthcare and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Healthcare 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 Target Healthcare REIT 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.