Correlation Between Charter Communications and Sabra Health

Can any of the company-specific risk be diversified away by investing in both Charter 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 Charter 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 Charter Communications and Sabra Health Care, you can compare the effects of market volatilities on Charter 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 Charter Communications with a short position of Sabra Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Sabra Health.

Diversification Opportunities for Charter Communications and Sabra Health

0.59

Correlation Coefficient

Charter Communications  Sabra Health

Very weak diversification

The 3 months correlation between Charter and Sabra is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Charter 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 Charter 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 Charter 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 Charter Communications i.e., Charter Communications and Sabra Health go up and down completely randomly.

Pair Corralation between Charter Communications and Sabra Health

Assuming the 90 days trading horizon Charter Communications is expected to generate 1.93 times more return on investment than Sabra Health. However, Charter Communications is 1.93 times more volatile than Sabra Health Care. It trades about 0.1 of its potential returns per unit of risk. Sabra Health Care is currently generating about 0.01 per unit of risk. If you would invest  28,280  in Charter Communications on September 27, 2024 and sell it today you would earn a total of  5,285  from holding Charter Communications or generate 18.69% return on investment over 90 days.

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

Charter Communications  vs.  Sabra Health Care

Charter Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Charter Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sabra Health Care

Risk-Adjusted Performance

0 of 100

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 Charter Communications and Sabra Health

The main advantage of trading using opposite Charter Communications and Sabra Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter 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 Charter 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.