Correlation Between Sabra Healthcare and Global Medical

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

Diversification Opportunities for Sabra Healthcare and Global Medical

0.08

Correlation Coefficient

Sabra Healthcare  Global Medical

Significant diversification

The 3 months correlation between Sabra and Global is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Healthcare REIT and Global Medical REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Medical 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 Global Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Medical REIT has no effect on the direction of Sabra Healthcare i.e., Sabra Healthcare and Global Medical go up and down completely randomly.

Pair Corralation between Sabra Healthcare and Global Medical

Given the investment horizon of 90 days Sabra Healthcare REIT is expected to generate 1.23 times more return on investment than Global Medical. However, Sabra Healthcare is 1.23 times more volatile than Global Medical REIT. It trades about 0.13 of its potential returns per unit of risk. Global Medical REIT is currently generating about -0.03 per unit of risk. If you would invest  1,676  in Sabra Healthcare REIT on August 30, 2024 and sell it today you would earn a total of  215.00  from holding Sabra Healthcare REIT or generate 12.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sabra Healthcare REIT  vs.  Global Medical REIT

Sabra Healthcare REIT

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Healthcare REIT are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sabra Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Global Medical REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Medical REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Global Medical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sabra Healthcare and Global Medical

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

The idea behind Sabra Healthcare REIT and Global Medical 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.