Correlation Between Sabra Health and Tesla

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

Diversification Opportunities for Sabra Health and Tesla

-0.23

Correlation Coefficient

Sabra Health  Tesla

Very good diversification

The 3 months correlation between Sabra and Tesla is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Sabra Health i.e., Sabra Health and Tesla go up and down completely randomly.

Pair Corralation between Sabra Health and Tesla

Assuming the 90 days horizon Sabra Health Care is expected to under-perform the Tesla. But the stock apears to be less risky and, when comparing its historical volatility, Sabra Health Care is 2.15 times less risky than Tesla. The stock trades about -0.14 of its potential returns per unit of risk. The Tesla Inc is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  31,715  in Tesla Inc on November 28, 2024 and sell it today you would lose (3,935) from holding Tesla Inc or give up 12.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Sabra Health Care  vs.  Tesla Inc

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Tesla Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sabra Health and Tesla

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

The idea behind Sabra Health Care and Tesla Inc 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.