Correlation Between Sabra Health and Coor Service

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

Diversification Opportunities for Sabra Health and Coor Service

-0.61

Correlation Coefficient

Sabra Health  Coor Service

Excellent diversification

The 3 months correlation between Sabra and Coor is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and Coor Service Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coor Service Management 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 Coor Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coor Service Management has no effect on the direction of Sabra Health i.e., Sabra Health and Coor Service go up and down completely randomly.

Pair Corralation between Sabra Health and Coor Service

Assuming the 90 days horizon Sabra Health is expected to generate 3.21 times less return on investment than Coor Service. But when comparing it to its historical volatility, Sabra Health Care is 4.56 times less risky than Coor Service. It trades about 0.07 of its potential returns per unit of risk. Coor Service Management is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  116.00  in Coor Service Management on September 24, 2024 and sell it today you would earn a total of  169.00  from holding Coor Service Management or generate 145.69% return on investment over 90 days.

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

Sabra Health Care  vs.  Coor Service Management

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.

Coor Service Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coor Service Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sabra Health and Coor Service

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

The idea behind Sabra Health Care and Coor Service Management 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.