Correlation Between EHEALTH and Sabra Health
Can any of the company-specific risk be diversified away by investing in both EHEALTH 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 EHEALTH and Sabra Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EHEALTH and Sabra Health Care, you can compare the effects of market volatilities on EHEALTH 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 EHEALTH with a short position of Sabra Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of EHEALTH and Sabra Health.
Diversification Opportunities for EHEALTH and Sabra Health
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EHEALTH and Sabra is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding EHEALTH 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 EHEALTH 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 EHEALTH 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 EHEALTH i.e., EHEALTH and Sabra Health go up and down completely randomly.
Pair Corralation between EHEALTH and Sabra Health
Assuming the 90 days trading horizon EHEALTH is expected to generate 1.64 times more return on investment than Sabra Health. However, EHEALTH is 1.64 times more volatile than Sabra Health Care. It trades about 0.13 of its potential returns per unit of risk. Sabra Health Care is currently generating about 0.09 per unit of risk. If you would invest 437.00 in EHEALTH on August 24, 2024 and sell it today you would earn a total of 41.00 from holding EHEALTH or generate 9.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
EHEALTH vs. Sabra Health Care
Performance |
| Timeline |
| EHEALTH |
| Sabra Health Care |
EHEALTH and Sabra Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EHEALTH and Sabra Health
The main advantage of trading using opposite EHEALTH and Sabra Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EHEALTH 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.The idea behind EHEALTH and Sabra Health Care 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.| Sabra Health vs. REINET INVESTMENTS SCA | Sabra Health vs. EAT WELL INVESTMENT | Sabra Health vs. Genco Shipping Trading | Sabra Health vs. ECHO INVESTMENT ZY |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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