Correlation Between Sabra Health and Goodyear Tire
Can any of the company-specific risk be diversified away by investing in both Sabra Health and Goodyear Tire 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 Goodyear Tire 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 Goodyear Tire Rubber, you can compare the effects of market volatilities on Sabra Health and Goodyear Tire 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 Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sabra Health and Goodyear Tire.
Diversification Opportunities for Sabra Health and Goodyear Tire
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sabra and Goodyear is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and Goodyear Tire Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire Rubber 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 Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire Rubber has no effect on the direction of Sabra Health i.e., Sabra Health and Goodyear Tire go up and down completely randomly.
Pair Corralation between Sabra Health and Goodyear Tire
Assuming the 90 days horizon Sabra Health is expected to generate 8.8 times less return on investment than Goodyear Tire. But when comparing it to its historical volatility, Sabra Health Care is 1.78 times less risky than Goodyear Tire. It trades about 0.06 of its potential returns per unit of risk. Goodyear Tire Rubber is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 788.00 in Goodyear Tire Rubber on August 29, 2024 and sell it today you would earn a total of 175.00 from holding Goodyear Tire Rubber or generate 22.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sabra Health Care vs. Goodyear Tire Rubber
Performance |
| Timeline |
| Sabra Health Care |
| Goodyear Tire Rubber |
Sabra Health and Goodyear Tire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sabra Health and Goodyear Tire
The main advantage of trading using opposite Sabra Health and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabra Health position performs unexpectedly, Goodyear Tire 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 Goodyear Tire will offset losses from the drop in Goodyear Tire's long position.| Sabra Health vs. CENTURIA OFFICE REIT | Sabra Health vs. Infrastrutture Wireless Italiane | Sabra Health vs. TITANIUM TRANSPORTGROUP | Sabra Health vs. KAUFMAN ET BROAD |
| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
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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