Correlation Between SEALED AIR and Sabra Health
Can any of the company-specific risk be diversified away by investing in both SEALED AIR 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 SEALED AIR and Sabra Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SEALED AIR and Sabra Health Care, you can compare the effects of market volatilities on SEALED AIR 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 SEALED AIR with a short position of Sabra Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEALED AIR and Sabra Health.
Diversification Opportunities for SEALED AIR and Sabra Health
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SEALED and Sabra is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SEALED AIR 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 SEALED AIR 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 SEALED AIR 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 SEALED AIR i.e., SEALED AIR and Sabra Health go up and down completely randomly.
Pair Corralation between SEALED AIR and Sabra Health
Assuming the 90 days trading horizon SEALED AIR is expected to generate 0.92 times more return on investment than Sabra Health. However, SEALED AIR is 1.09 times less risky than Sabra Health. It trades about 0.08 of its potential returns per unit of risk. Sabra Health Care is currently generating about 0.04 per unit of risk. If you would invest 3,320 in SEALED AIR on August 28, 2024 and sell it today you would earn a total of 100.00 from holding SEALED AIR or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SEALED AIR vs. Sabra Health Care
Performance |
| Timeline |
| SEALED AIR |
| Sabra Health Care |
SEALED AIR and Sabra Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SEALED AIR and Sabra Health
The main advantage of trading using opposite SEALED AIR and Sabra Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEALED AIR 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 SEALED AIR 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. Alaska Air Group | Sabra Health vs. Air New Zealand | Sabra Health vs. DIVERSIFIED ROYALTY | Sabra Health vs. SEALED AIR |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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