Correlation Between Sabra Health and National Beverage

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

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

Diversification Opportunities for Sabra Health and National Beverage

0.74

Correlation Coefficient

Sabra Health  National Beverage

Poor diversification

The 3 months correlation between Sabra and National is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and Sabra Health 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 Sabra Health Care are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Sabra Health i.e., Sabra Health and National Beverage go up and down completely randomly.

Pair Corralation between Sabra Health and National Beverage

Assuming the 90 days horizon Sabra Health is expected to generate 4.29 times less return on investment than National Beverage. In addition to that, Sabra Health is 1.06 times more volatile than National Beverage Corp. It trades about 0.03 of its total potential returns per unit of risk. National Beverage Corp is currently generating about 0.12 per unit of volatility. If you would invest  3,980  in National Beverage Corp on September 13, 2024 and sell it today you would earn a total of  500.00  from holding National Beverage Corp or generate 12.56% return on investment over 90 days.

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

Sabra Health Care  vs.  National Beverage Corp

Sabra Health Care

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Health Care are ranked lower than 2 (%) 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

National Beverage Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sabra Health and National Beverage

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

The idea behind Sabra Health Care and National Beverage Corp 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.