Correlation Between Sabra Health and FARO Technologies
Can any of the company-specific risk be diversified away by investing in both Sabra Health and FARO Technologies 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 Sabra Health and FARO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sabra Health Care and FARO Technologies, you can compare the effects of market volatilities on Sabra Health and FARO Technologies 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 Sabra Health with a short position of FARO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sabra Health and FARO Technologies.
Diversification Opportunities for Sabra Health and FARO Technologies
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sabra and FARO is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies and Sabra Health 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 Sabra Health Care are associated (or correlated) with FARO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARO Technologies has no effect on the direction of Sabra Health i.e., Sabra Health and FARO Technologies go up and down completely randomly.
Pair Corralation between Sabra Health and FARO Technologies
Assuming the 90 days horizon Sabra Health is expected to generate 23.32 times less return on investment than FARO Technologies. But when comparing it to its historical volatility, Sabra Health Care is 3.96 times less risky than FARO Technologies. It trades about 0.05 of its potential returns per unit of risk. FARO Technologies is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,610 in FARO Technologies on September 1, 2024 and sell it today you would earn a total of 870.00 from holding FARO Technologies or generate 54.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sabra Health Care vs. FARO Technologies
Performance |
| Timeline |
| Sabra Health Care |
| FARO Technologies |
Sabra Health and FARO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sabra Health and FARO Technologies
The main advantage of trading using opposite Sabra Health and FARO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabra Health position performs unexpectedly, FARO Technologies 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 FARO Technologies will offset losses from the drop in FARO Technologies' long position.| Sabra Health vs. Hanison Construction Holdings | Sabra Health vs. UNITED UTILITIES GR | Sabra Health vs. NORTHEAST UTILITIES | Sabra Health vs. Hitachi Construction Machinery |
| FARO Technologies vs. Perseus Mining Limited | FARO Technologies vs. LION ONE METALS | FARO Technologies vs. Western Copper and | FARO Technologies vs. TreeHouse Foods |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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