Correlation Between Nasdaq and Sabra Healthcare
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Sabra 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 Nasdaq and Sabra Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Sabra Healthcare REIT, you can compare the effects of market volatilities on Nasdaq and Sabra 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 Nasdaq with a short position of Sabra Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Sabra Healthcare.
Diversification Opportunities for Nasdaq and Sabra Healthcare
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and Sabra is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Sabra Healthcare REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabra Healthcare REIT and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Sabra Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabra Healthcare REIT has no effect on the direction of Nasdaq i.e., Nasdaq and Sabra Healthcare go up and down completely randomly.
Pair Corralation between Nasdaq and Sabra Healthcare
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.54 times more return on investment than Sabra Healthcare. However, Nasdaq Inc is 1.86 times less risky than Sabra Healthcare. It trades about 0.36 of its potential returns per unit of risk. Sabra Healthcare REIT is currently generating about -0.04 per unit of risk. If you would invest 7,534 in Nasdaq Inc on August 27, 2024 and sell it today you would earn a total of 618.00 from holding Nasdaq Inc or generate 8.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Sabra Healthcare REIT
Performance |
| Timeline |
| Nasdaq Inc |
| Sabra Healthcare REIT |
Nasdaq and Sabra Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Sabra Healthcare
The main advantage of trading using opposite Nasdaq and Sabra Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Sabra 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 Sabra Healthcare will offset losses from the drop in Sabra Healthcare's long position.The idea behind Nasdaq Inc and Sabra Healthcare REIT 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 Healthcare vs. Healthcare Realty Trust | Sabra Healthcare vs. Healthpeak Properties | Sabra Healthcare vs. Community Healthcare Trust | Sabra Healthcare vs. Universal Health Realty |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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