Correlation Between Sabra Health and Berkshire Hathaway

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

Diversification Opportunities for Sabra Health and Berkshire Hathaway

-0.32

Correlation Coefficient

Sabra Health  Berkshire Hathaway

Very good diversification

The 3 months correlation between Sabra and Berkshire is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway 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 Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway has no effect on the direction of Sabra Health i.e., Sabra Health and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Sabra Health and Berkshire Hathaway

Assuming the 90 days horizon Sabra Health is expected to generate 58.66 times less return on investment than Berkshire Hathaway. But when comparing it to its historical volatility, Sabra Health Care is 71.57 times less risky than Berkshire Hathaway. It trades about 0.16 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  64,650,000  in Berkshire Hathaway on September 3, 2024 and sell it today you would earn a total of  3,500,000  from holding Berkshire Hathaway or generate 5.41% return on investment over 90 days.

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

Sabra Health Care  vs.  Berkshire Hathaway

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 unsteady basic indicators, Sabra Health reported solid returns over the last few months and may actually be approaching a breakup point.

Berkshire Hathaway

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Berkshire Hathaway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabra Health and Berkshire Hathaway

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

The idea behind Sabra Health Care and Berkshire Hathaway 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.