Correlation Between Omega Healthcare and DiamondRock Hospitality
Can any of the company-specific risk be diversified away by investing in both Omega Healthcare and DiamondRock Hospitality 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 DiamondRock Hospitality 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 DiamondRock Hospitality, you can compare the effects of market volatilities on Omega Healthcare and DiamondRock Hospitality 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 DiamondRock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omega Healthcare and DiamondRock Hospitality.
Diversification Opportunities for Omega Healthcare and DiamondRock Hospitality
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Omega and DiamondRock is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Omega Healthcare Investors and DiamondRock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiamondRock Hospitality 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 DiamondRock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiamondRock Hospitality has no effect on the direction of Omega Healthcare i.e., Omega Healthcare and DiamondRock Hospitality go up and down completely randomly.
Pair Corralation between Omega Healthcare and DiamondRock Hospitality
Assuming the 90 days horizon Omega Healthcare is expected to generate 1.85 times less return on investment than DiamondRock Hospitality. But when comparing it to its historical volatility, Omega Healthcare Investors is 3.1 times less risky than DiamondRock Hospitality. It trades about 0.12 of its potential returns per unit of risk. DiamondRock Hospitality is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 712.00 in DiamondRock Hospitality on September 4, 2024 and sell it today you would earn a total of 153.00 from holding DiamondRock Hospitality or generate 21.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.85% |
| Values | Daily Returns |
Omega Healthcare Investors vs. DiamondRock Hospitality
Performance |
| Timeline |
| Omega Healthcare Inv |
| DiamondRock Hospitality |
Omega Healthcare and DiamondRock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Omega Healthcare and DiamondRock Hospitality
The main advantage of trading using opposite Omega Healthcare and DiamondRock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omega Healthcare position performs unexpectedly, DiamondRock Hospitality 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 DiamondRock Hospitality will offset losses from the drop in DiamondRock Hospitality's long position.| Omega Healthcare vs. Welltower | Omega Healthcare vs. Medical Properties Trust | Omega Healthcare vs. Sabra Health Care | Omega Healthcare vs. National Health Investors |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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