Correlation Between Sabra Healthcare and American Healthcare

Can any of the company-specific risk be diversified away by investing in both Sabra Healthcare and American Healthcare 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 Healthcare and American Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sabra Healthcare REIT and American Healthcare REIT,, you can compare the effects of market volatilities on Sabra Healthcare and American Healthcare 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 Healthcare with a short position of American Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sabra Healthcare and American Healthcare.

Diversification Opportunities for Sabra Healthcare and American Healthcare

-0.19

Correlation Coefficient

Sabra Healthcare  American Healthcare

Good diversification

The 3 months correlation between Sabra and American is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Healthcare REIT and American Healthcare REIT, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Healthcare REIT, and Sabra Healthcare 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 Healthcare REIT are associated (or correlated) with American Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Healthcare REIT, has no effect on the direction of Sabra Healthcare i.e., Sabra Healthcare and American Healthcare go up and down completely randomly.

Pair Corralation between Sabra Healthcare and American Healthcare

Given the investment horizon of 90 days Sabra Healthcare REIT is expected to under-perform the American Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Sabra Healthcare REIT is 1.09 times less risky than American Healthcare. The stock trades about -0.09 of its potential returns per unit of risk. The American Healthcare REIT, is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,558  in American Healthcare REIT, on October 6, 2024 and sell it today you would earn a total of  259.00  from holding American Healthcare REIT, or generate 10.13% return on investment over 90 days.

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

Sabra Healthcare REIT  vs.  American Healthcare REIT,

Sabra Healthcare REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabra Healthcare REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sabra Healthcare is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

American Healthcare REIT,

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Healthcare REIT, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical indicators, American Healthcare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabra Healthcare and American Healthcare

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

The idea behind Sabra Healthcare REIT and American Healthcare REIT, 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.