Correlation Between Iridium Communications and Sabra Health

Can any of the company-specific risk be diversified away by investing in both Iridium Communications 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 Iridium Communications and Sabra Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Iridium Communications and Sabra Health Care, you can compare the effects of market volatilities on Iridium Communications 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 Iridium Communications with a short position of Sabra Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Sabra Health.

Diversification Opportunities for Iridium Communications and Sabra Health

-0.03

Correlation Coefficient

Iridium Communications  Sabra Health

Good diversification

The 3 months correlation between Iridium and Sabra is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications 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 Iridium Communications 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 Iridium Communications 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 Iridium Communications i.e., Iridium Communications and Sabra Health go up and down completely randomly.

Pair Corralation between Iridium Communications and Sabra Health

Assuming the 90 days horizon Iridium Communications is expected to under-perform the Sabra Health. In addition to that, Iridium Communications is 1.07 times more volatile than Sabra Health Care. It trades about -0.11 of its total potential returns per unit of risk. Sabra Health Care is currently generating about -0.12 per unit of volatility. If you would invest  1,709  in Sabra Health Care on October 6, 2024 and sell it today you would lose (54.00) from holding Sabra Health Care or give up 3.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Iridium Communications  vs.  Sabra Health Care

Iridium Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Iridium Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sabra Health Care

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Health Care are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sabra Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Iridium Communications and Sabra Health

The main advantage of trading using opposite Iridium Communications and Sabra Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications 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 Iridium Communications 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.