Correlation Between Sabra Health and Cardinal Health

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

Diversification Opportunities for Sabra Health and Cardinal Health

0.65

Correlation Coefficient

Sabra Health  Cardinal Health

Poor diversification

The 3 months correlation between Sabra and Cardinal is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Sabra Health i.e., Sabra Health and Cardinal Health go up and down completely randomly.

Pair Corralation between Sabra Health and Cardinal Health

Assuming the 90 days horizon Sabra Health Care is expected to generate 0.99 times more return on investment than Cardinal Health. However, Sabra Health Care is 1.01 times less risky than Cardinal Health. It trades about 0.16 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.11 per unit of risk. If you would invest  1,502  in Sabra Health Care on September 3, 2024 and sell it today you would earn a total of  279.00  from holding Sabra Health Care or generate 18.58% 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.  Cardinal Health

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.

Cardinal Health

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sabra Health and Cardinal Health

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

The idea behind Sabra Health Care and Cardinal Health 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..