Correlation Between Nufarm and Omega Healthcare
Can any of the company-specific risk be diversified away by investing in both Nufarm 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 Nufarm and Omega Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nufarm Limited and Omega Healthcare Investors, you can compare the effects of market volatilities on Nufarm 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 Nufarm with a short position of Omega Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and Omega Healthcare.
Diversification Opportunities for Nufarm and Omega Healthcare
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nufarm and Omega is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited 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 Nufarm 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 Nufarm Limited 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 Nufarm i.e., Nufarm and Omega Healthcare go up and down completely randomly.
Pair Corralation between Nufarm and Omega Healthcare
Assuming the 90 days horizon Nufarm Limited is expected to under-perform the Omega Healthcare. In addition to that, Nufarm is 1.22 times more volatile than Omega Healthcare Investors. It trades about -0.03 of its total potential returns per unit of risk. Omega Healthcare Investors is currently generating about 0.06 per unit of volatility. If you would invest 2,274 in Omega Healthcare Investors on November 27, 2024 and sell it today you would earn a total of 1,163 from holding Omega Healthcare Investors or generate 51.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nufarm Limited vs. Omega Healthcare Investors
Performance |
| Timeline |
| Nufarm Limited |
| Omega Healthcare Inv |
Nufarm and Omega Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nufarm and Omega Healthcare
The main advantage of trading using opposite Nufarm and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nufarm 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 Nufarm Limited 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.| Omega Healthcare vs. AGF Management Limited | Omega Healthcare vs. Scandinavian Tobacco Group | Omega Healthcare vs. LIFENET INSURANCE CO | Omega Healthcare vs. Insurance Australia Group |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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