Correlation Between Boston Beer and Sabra Health

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

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

Diversification Opportunities for Boston Beer and Sabra Health

0.66

Correlation Coefficient

Boston Beer  Sabra Health

Poor diversification

The 3 months correlation between Boston and Sabra is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer 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 Boston Beer 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 The Boston Beer 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 Boston Beer i.e., Boston Beer and Sabra Health go up and down completely randomly.

Pair Corralation between Boston Beer and Sabra Health

Assuming the 90 days trading horizon The Boston Beer is expected to under-perform the Sabra Health. But the stock apears to be less risky and, when comparing its historical volatility, The Boston Beer is 1.07 times less risky than Sabra Health. The stock trades about -0.3 of its potential returns per unit of risk. The Sabra Health Care is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,580  in Sabra Health Care on December 21, 2024 and sell it today you would earn a total of  9.00  from holding Sabra Health Care or generate 0.57% return on investment over 90 days.

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

The Boston Beer  vs.  Sabra Health Care

Boston Beer

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sabra Health Care

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Health Care are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Boston Beer and Sabra Health

The main advantage of trading using opposite Boston Beer and Sabra Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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 The Boston Beer 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.