Correlation Between Cal Maine and Sabra Health

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

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

Diversification Opportunities for Cal Maine and Sabra Health

0.27

Correlation Coefficient

Cal Maine  Sabra Health

Modest diversification

The 3 months correlation between Cal and Sabra is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods 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 Cal Maine 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 Cal Maine Foods 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 Cal Maine i.e., Cal Maine and Sabra Health go up and down completely randomly.

Pair Corralation between Cal Maine and Sabra Health

Assuming the 90 days trading horizon Cal Maine Foods is expected to under-perform the Sabra Health. In addition to that, Cal Maine is 1.73 times more volatile than Sabra Health Care. It trades about -0.02 of its total potential returns per unit of risk. Sabra Health Care is currently generating about 0.0 per unit of volatility. If you would invest  1,580  in Sabra Health Care on December 28, 2024 and sell it today you would lose (10.00) from holding Sabra Health Care or give up 0.63% of portfolio value over 90 days.

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

Cal Maine Foods  vs.  Sabra Health Care

Cal Maine Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cal Maine Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cal Maine is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sabra Health Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sabra Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Cal Maine and Sabra Health

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

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.