Correlation Between Sabra Health and Antofagasta Plc

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

Diversification Opportunities for Sabra Health and Antofagasta Plc

-0.52

Correlation Coefficient

Sabra Health  Antofagasta Plc

Excellent diversification

The 3 months correlation between Sabra and Antofagasta is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and Antofagasta plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antofagasta plc 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 Antofagasta Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antofagasta plc has no effect on the direction of Sabra Health i.e., Sabra Health and Antofagasta Plc go up and down completely randomly.

Pair Corralation between Sabra Health and Antofagasta Plc

Assuming the 90 days horizon Sabra Health Care is expected to generate 0.66 times more return on investment than Antofagasta Plc. However, Sabra Health Care is 1.52 times less risky than Antofagasta Plc. It trades about 0.09 of its potential returns per unit of risk. Antofagasta plc is currently generating about -0.06 per unit of risk. If you would invest  1,377  in Sabra Health Care on September 29, 2024 and sell it today you would earn a total of  233.00  from holding Sabra Health Care or generate 16.92% 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.  Antofagasta plc

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.

Antofagasta plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Antofagasta plc 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 Antofagasta Plc

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

The idea behind Sabra Health Care and Antofagasta plc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.