Correlation Between Sabra Healthcare and Equinix

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

Diversification Opportunities for Sabra Healthcare and Equinix

0.69

Correlation Coefficient

Sabra Healthcare  Equinix

Poor diversification

The 3 months correlation between Sabra and Equinix is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Healthcare REIT and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Sabra Healthcare i.e., Sabra Healthcare and Equinix go up and down completely randomly.

Pair Corralation between Sabra Healthcare and Equinix

Given the investment horizon of 90 days Sabra Healthcare REIT is expected to under-perform the Equinix. In addition to that, Sabra Healthcare is 1.18 times more volatile than Equinix. It trades about -0.08 of its total potential returns per unit of risk. Equinix is currently generating about -0.06 per unit of volatility. If you would invest  95,985  in Equinix on December 1, 2024 and sell it today you would lose (5,523) from holding Equinix or give up 5.75% of portfolio value over 90 days.

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

Sabra Healthcare REIT  vs.  Equinix

Sabra Healthcare REIT

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Equinix

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equinix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Equinix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sabra Healthcare and Equinix

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

The idea behind Sabra Healthcare REIT and Equinix 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 Anywhere module to track or share privately all of your investments from the convenience of any device.