Correlation Between Sabra Health and UNITED UTILITIES

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

Diversification Opportunities for Sabra Health and UNITED UTILITIES

0.46

Correlation Coefficient

Sabra Health  UNITED UTILITIES

Very weak diversification

The 3 months correlation between Sabra and UNITED is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and UNITED UTILITIES GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED UTILITIES 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 UNITED UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED UTILITIES has no effect on the direction of Sabra Health i.e., Sabra Health and UNITED UTILITIES go up and down completely randomly.

Pair Corralation between Sabra Health and UNITED UTILITIES

Assuming the 90 days horizon Sabra Health Care is expected to under-perform the UNITED UTILITIES. In addition to that, Sabra Health is 1.36 times more volatile than UNITED UTILITIES GR. It trades about -0.01 of its total potential returns per unit of risk. UNITED UTILITIES GR is currently generating about 0.02 per unit of volatility. If you would invest  1,244  in UNITED UTILITIES GR on October 6, 2024 and sell it today you would earn a total of  6.00  from holding UNITED UTILITIES GR or generate 0.48% return on investment over 90 days.

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

Sabra Health Care  vs.  UNITED UTILITIES GR

Sabra Health Care

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Health Care are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sabra Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

UNITED UTILITIES

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED UTILITIES GR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, UNITED UTILITIES is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sabra Health and UNITED UTILITIES

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

The idea behind Sabra Health Care and UNITED UTILITIES GR 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.