Correlation Between Sabra Health and EBRO FOODS

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

Diversification Opportunities for Sabra Health and EBRO FOODS

0.2

Correlation Coefficient

Sabra Health  EBRO FOODS

Modest diversification

The 3 months correlation between Sabra and EBRO is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and EBRO FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBRO FOODS 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 EBRO FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBRO FOODS has no effect on the direction of Sabra Health i.e., Sabra Health and EBRO FOODS go up and down completely randomly.

Pair Corralation between Sabra Health and EBRO FOODS

Assuming the 90 days horizon Sabra Health Care is expected to under-perform the EBRO FOODS. In addition to that, Sabra Health is 2.08 times more volatile than EBRO FOODS. It trades about -0.33 of its total potential returns per unit of risk. EBRO FOODS is currently generating about -0.04 per unit of volatility. If you would invest  1,578  in EBRO FOODS on September 23, 2024 and sell it today you would lose (8.00) from holding EBRO FOODS or give up 0.51% of portfolio value over 90 days.

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

Sabra Health Care  vs.  EBRO FOODS

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.

EBRO FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sabra Health and EBRO FOODS

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

The idea behind Sabra Health Care and EBRO FOODS 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.