Correlation Between Software Circle and Omega Healthcare

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

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

Diversification Opportunities for Software Circle and Omega Healthcare

-0.11

Correlation Coefficient

Software Circle  Omega Healthcare

Good diversification

The 3 months correlation between Software and Omega is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc 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 Software Circle 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 Software Circle plc 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 Software Circle i.e., Software Circle and Omega Healthcare go up and down completely randomly.

Pair Corralation between Software Circle and Omega Healthcare

Assuming the 90 days trading horizon Software Circle plc is expected to generate 1.2 times more return on investment than Omega Healthcare. However, Software Circle is 1.2 times more volatile than Omega Healthcare Investors. It trades about 0.01 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  2,950  in Software Circle plc on April 8, 2025 and sell it today you would earn a total of  0.00  from holding Software Circle plc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Software Circle plc  vs.  Omega Healthcare Investors

Software Circle plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Software Circle plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Software Circle exhibited solid returns over the last few months and may actually be approaching a breakup point.

Omega Healthcare Inv

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Omega Healthcare Investors are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Omega Healthcare is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Software Circle and Omega Healthcare

The main advantage of trading using opposite Software Circle and Omega Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Circle 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 Software Circle plc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.