Correlation Between LTC Properties and Sabra Healthcare

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

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

Diversification Opportunities for LTC Properties and Sabra Healthcare

0.93

Correlation Coefficient

LTC Properties  Sabra Healthcare

Almost no diversification

The 3 months correlation between LTC and Sabra is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding LTC Properties 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 LTC Properties 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 LTC Properties 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 LTC Properties i.e., LTC Properties and Sabra Healthcare go up and down completely randomly.

Pair Corralation between LTC Properties and Sabra Healthcare

Considering the 90-day investment horizon LTC Properties is expected to generate 0.71 times more return on investment than Sabra Healthcare. However, LTC Properties is 1.41 times less risky than Sabra Healthcare. It trades about -0.13 of its potential returns per unit of risk. Sabra Healthcare REIT is currently generating about -0.11 per unit of risk. If you would invest  3,796  in LTC Properties on November 29, 2024 and sell it today you would lose (336.00) from holding LTC Properties or give up 8.85% of portfolio value over 90 days.

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

LTC Properties  vs.  Sabra Healthcare REIT

LTC Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days LTC Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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 LTC Properties and Sabra Healthcare

The main advantage of trading using opposite LTC Properties and Sabra Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LTC Properties 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 LTC Properties 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.