Correlation Between CAL-MAINE FOODS and Sabra Health
Can any of the company-specific risk be diversified away by investing in both CAL-MAINE FOODS and Sabra Health 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 CAL-MAINE FOODS and Sabra Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAL MAINE FOODS and Sabra Health Care, you can compare the effects of market volatilities on CAL-MAINE FOODS and Sabra Health 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 CAL-MAINE FOODS with a short position of Sabra Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAL-MAINE FOODS and Sabra Health.
Diversification Opportunities for CAL-MAINE FOODS and Sabra Health
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CAL-MAINE and Sabra is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and Sabra Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabra Health Care and CAL-MAINE FOODS 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 CAL MAINE FOODS are associated (or correlated) with Sabra Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabra Health Care has no effect on the direction of CAL-MAINE FOODS i.e., CAL-MAINE FOODS and Sabra Health go up and down completely randomly.
Pair Corralation between CAL-MAINE FOODS and Sabra Health
Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 1.3 times more return on investment than Sabra Health. However, CAL-MAINE FOODS is 1.3 times more volatile than Sabra Health Care. It trades about 0.12 of its potential returns per unit of risk. Sabra Health Care is currently generating about 0.12 per unit of risk. If you would invest 4,164 in CAL MAINE FOODS on August 31, 2024 and sell it today you would earn a total of 4,976 from holding CAL MAINE FOODS or generate 119.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
CAL MAINE FOODS vs. Sabra Health Care
Performance |
| Timeline |
| CAL MAINE FOODS |
| Sabra Health Care |
CAL-MAINE FOODS and Sabra Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAL-MAINE FOODS and Sabra Health
The main advantage of trading using opposite CAL-MAINE FOODS and Sabra Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAL-MAINE FOODS position performs unexpectedly, Sabra Health 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 Sabra Health will offset losses from the drop in Sabra Health's long position.| CAL-MAINE FOODS vs. Verizon Communications | CAL-MAINE FOODS vs. Spirent Communications plc | CAL-MAINE FOODS vs. WillScot Mobile Mini | CAL-MAINE FOODS vs. Calibre Mining Corp |
| Sabra Health vs. Medical Properties Trust | Sabra Health vs. LTC Properties | Sabra Health vs. The GEO 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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