Correlation Between Sabra Healthcare and National Health

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

Diversification Opportunities for Sabra Healthcare and National Health

0.71

Correlation Coefficient

Sabra Healthcare  National Health

Poor diversification

The 3 months correlation between Sabra and National is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Healthcare REIT and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors 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 National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of Sabra Healthcare i.e., Sabra Healthcare and National Health go up and down completely randomly.

Pair Corralation between Sabra Healthcare and National Health

Given the investment horizon of 90 days Sabra Healthcare is expected to generate 1.57 times less return on investment than National Health. In addition to that, Sabra Healthcare is 1.18 times more volatile than National Health Investors. It trades about 0.05 of its total potential returns per unit of risk. National Health Investors is currently generating about 0.1 per unit of volatility. If you would invest  6,802  in National Health Investors on December 29, 2024 and sell it today you would earn a total of  577.00  from holding National Health Investors or generate 8.48% return on investment over 90 days.

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

Sabra Healthcare REIT  vs.  National Health Investors

Sabra Healthcare REIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Healthcare REIT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

National Health Investors

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Health Investors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, National Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sabra Healthcare and National Health

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

The idea behind Sabra Healthcare REIT and National Health Investors 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..