Correlation Between Sabra Health and Toyota Tsusho

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

Diversification Opportunities for Sabra Health and Toyota Tsusho

-0.42

Correlation Coefficient

Sabra Health  Toyota Tsusho

Very good diversification

The 3 months correlation between Sabra and Toyota is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and Toyota Tsusho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Tsusho 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 Toyota Tsusho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Tsusho has no effect on the direction of Sabra Health i.e., Sabra Health and Toyota Tsusho go up and down completely randomly.

Pair Corralation between Sabra Health and Toyota Tsusho

Assuming the 90 days horizon Sabra Health is expected to generate 1.81 times less return on investment than Toyota Tsusho. In addition to that, Sabra Health is 1.02 times more volatile than Toyota Tsusho. It trades about 0.05 of its total potential returns per unit of risk. Toyota Tsusho is currently generating about 0.1 per unit of volatility. If you would invest  1,530  in Toyota Tsusho on September 2, 2024 and sell it today you would earn a total of  60.00  from holding Toyota Tsusho or generate 3.92% return on investment over 90 days.

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

Sabra Health Care  vs.  Toyota Tsusho

Sabra Health Care

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Health Care are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sabra Health reported solid returns over the last few months and may actually be approaching a breakup point.

Toyota Tsusho

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toyota Tsusho has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Toyota Tsusho is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sabra Health and Toyota Tsusho

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

The idea behind Sabra Health Care and Toyota Tsusho 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.