Correlation Between Sabra Health and Pan Pacific

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

Diversification Opportunities for Sabra Health and Pan Pacific

-0.3

Correlation Coefficient

Sabra Health  Pan Pacific

Very good diversification

The 3 months correlation between Sabra and Pan is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and Pan Pacific International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Pacific International 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 Pan Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Pacific International has no effect on the direction of Sabra Health i.e., Sabra Health and Pan Pacific go up and down completely randomly.

Pair Corralation between Sabra Health and Pan Pacific

Assuming the 90 days horizon Sabra Health is expected to generate 2.45 times less return on investment than Pan Pacific. But when comparing it to its historical volatility, Sabra Health Care is 2.72 times less risky than Pan Pacific. It trades about 0.1 of its potential returns per unit of risk. Pan Pacific International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  850.00  in Pan Pacific International on October 4, 2024 and sell it today you would earn a total of  1,730  from holding Pan Pacific International or generate 203.53% 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.  Pan Pacific International

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.

Pan Pacific International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Pacific International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pan Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabra Health and Pan Pacific

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

The idea behind Sabra Health Care and Pan Pacific International 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.