Correlation Between Sabra Health and International Business
Can any of the company-specific risk be diversified away by investing in both Sabra Health and International Business 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 International Business 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 International Business Machines, you can compare the effects of market volatilities on Sabra Health and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sabra Health and International Business.
Diversification Opportunities for Sabra Health and International Business
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sabra and International is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Sabra Health i.e., Sabra Health and International Business go up and down completely randomly.
Pair Corralation between Sabra Health and International Business
Assuming the 90 days horizon Sabra Health Care is expected to under-perform the International Business. But the stock apears to be less risky and, when comparing its historical volatility, Sabra Health Care is 1.46 times less risky than International Business. The stock trades about -0.16 of its potential returns per unit of risk. The International Business Machines is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 19,636 in International Business Machines on September 20, 2024 and sell it today you would earn a total of 2,149 from holding International Business Machines or generate 10.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sabra Health Care vs. International Business Machine
Performance |
| Timeline |
| Sabra Health Care |
| International Business |
Sabra Health and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sabra Health and International Business
The main advantage of trading using opposite Sabra Health and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabra Health position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| Sabra Health vs. Welltower | Sabra Health vs. Superior Plus Corp | Sabra Health vs. NMI Holdings | Sabra Health vs. SIVERS SEMICONDUCTORS AB |
| International Business vs. Apple Inc | International Business vs. Apple Inc | International Business vs. Apple Inc | International Business vs. Microsoft |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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