Correlation Between CareTrust REIT and Omega Healthcare

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Can any of the company-specific risk be diversified away by investing in both CareTrust REIT 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 CareTrust REIT and Omega Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CareTrust REIT and Omega Healthcare Investors, you can compare the effects of market volatilities on CareTrust REIT 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 CareTrust REIT with a short position of Omega Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of CareTrust REIT and Omega Healthcare.

Diversification Opportunities for CareTrust REIT and Omega Healthcare

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between CareTrust and Omega is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CareTrust 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 CareTrust REIT 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 CareTrust 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 CareTrust REIT i.e., CareTrust REIT and Omega Healthcare go up and down completely randomly.

Pair Corralation between CareTrust REIT and Omega Healthcare

Given the investment horizon of 90 days CareTrust REIT is expected to generate 1.28 times more return on investment than Omega Healthcare. However, CareTrust REIT is 1.28 times more volatile than Omega Healthcare Investors. It trades about 0.27 of its potential returns per unit of risk. Omega Healthcare Investors is currently generating about -0.03 per unit of risk. If you would invest  2,296  in CareTrust REIT on December 29, 2023 and sell it today you would earn a total of  149.00  from holding CareTrust REIT or generate 6.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

CareTrust REIT  vs.  Omega Healthcare Investors

 Performance 
       Timeline  
CareTrust REIT 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in CareTrust REIT are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, CareTrust REIT may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Omega Healthcare Inv 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Omega Healthcare Investors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Omega Healthcare is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

CareTrust REIT and Omega Healthcare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CareTrust REIT and Omega Healthcare

The main advantage of trading using opposite CareTrust REIT and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CareTrust REIT 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 CareTrust 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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