Correlation Between Sabra Health and EHEALTH

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

Diversification Opportunities for Sabra Health and EHEALTH

-0.02

Correlation Coefficient

Sabra Health  EHEALTH

Good diversification

The 3 months correlation between Sabra and EHEALTH is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and EHEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EHEALTH 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 EHEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EHEALTH has no effect on the direction of Sabra Health i.e., Sabra Health and EHEALTH go up and down completely randomly.

Pair Corralation between Sabra Health and EHEALTH

Assuming the 90 days horizon Sabra Health Care is expected to generate 0.49 times more return on investment than EHEALTH. However, Sabra Health Care is 2.02 times less risky than EHEALTH. It trades about 0.01 of its potential returns per unit of risk. EHEALTH is currently generating about -0.08 per unit of risk. If you would invest  1,580  in Sabra Health Care on December 29, 2024 and sell it today you would earn a total of  6.00  from holding Sabra Health Care or generate 0.38% 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.  EHEALTH

Sabra Health Care

Risk-Adjusted Performance

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.

EHEALTH

Risk-Adjusted Performance

Very Weak

Over the last 90 days EHEALTH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sabra Health and EHEALTH

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

The idea behind Sabra Health Care and EHEALTH 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.