Correlation Between Alexandria Real and Sabra Healthcare

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

By analyzing existing cross correlation between Alexandria Real Estate and Sabra Healthcare REIT, you can compare the effects of market volatilities on Alexandria Real and Sabra Healthcare 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 Alexandria Real with a short position of Sabra Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alexandria Real and Sabra Healthcare.

Diversification Opportunities for Alexandria Real and Sabra Healthcare

0.91

Correlation Coefficient

Alexandria Real  Sabra Healthcare

Almost no diversification

The 3 months correlation between Alexandria and Sabra is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Alexandria Real Estate and Sabra Healthcare REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabra Healthcare REIT and Alexandria Real 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 Alexandria Real Estate are associated (or correlated) with Sabra Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabra Healthcare REIT has no effect on the direction of Alexandria Real i.e., Alexandria Real and Sabra Healthcare go up and down completely randomly.

Pair Corralation between Alexandria Real and Sabra Healthcare

Considering the 90-day investment horizon Alexandria Real Estate is expected to generate 1.03 times more return on investment than Sabra Healthcare. However, Alexandria Real is 1.03 times more volatile than Sabra Healthcare REIT. It trades about -0.08 of its potential returns per unit of risk. Sabra Healthcare REIT is currently generating about -0.09 per unit of risk. If you would invest  10,290  in Alexandria Real Estate on November 20, 2024 and sell it today you would lose (805.00) from holding Alexandria Real Estate or give up 7.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Alexandria Real Estate  vs.  Sabra Healthcare REIT

Alexandria Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alexandria Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sabra Healthcare REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sabra Healthcare REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alexandria Real and Sabra Healthcare

The main advantage of trading using opposite Alexandria Real and Sabra Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alexandria Real position performs unexpectedly, Sabra Healthcare 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 Healthcare will offset losses from the drop in Sabra Healthcare's long position.

The idea behind Alexandria Real Estate and Sabra Healthcare REIT 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.