Correlation Between Omega Healthcare and British American
Can any of the company-specific risk be diversified away by investing in both Omega Healthcare and British American 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 Omega Healthcare and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Omega Healthcare Investors, and British American Tobacco, you can compare the effects of market volatilities on Omega Healthcare and British American 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 Omega Healthcare with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omega Healthcare and British American.
Diversification Opportunities for Omega Healthcare and British American
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Omega and British is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors, and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Omega 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 Omega Healthcare Investors, are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and British American go up and down completely randomly.
Pair Corralation between Omega Healthcare and British American
Assuming the 90 days trading horizon Omega Healthcare Investors, is expected to under-perform the British American. But the stock apears to be less risky and, when comparing its historical volatility, Omega Healthcare Investors, is 2.43 times less risky than British American. The stock trades about -0.24 of its potential returns per unit of risk. The British American Tobacco is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,530 in British American Tobacco on November 5, 2024 and sell it today you would earn a total of 83.00 from holding British American Tobacco or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 76.19% |
| Values | Daily Returns |
Omega Healthcare Investors, vs. British American Tobacco
Performance |
| Timeline |
| Omega Healthcare Inv |
| British American Tobacco |
Omega Healthcare and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Omega Healthcare and British American
The main advantage of trading using opposite Omega Healthcare and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omega Healthcare position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Omega Healthcare vs. KB Financial Group | Omega Healthcare vs. MAHLE Metal Leve | Omega Healthcare vs. Prudential Financial | Omega Healthcare vs. Nordon Indstrias Metalrgicas |
| British American vs. Altria Group | British American vs. Karsten SA | British American vs. Ameriprise Financial | British American vs. LPL Financial Holdings |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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