Correlation Between Sabra Healthcare and STAG Industrial

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

Diversification Opportunities for Sabra Healthcare and STAG Industrial

0.6

Correlation Coefficient

Sabra Healthcare  STAG Industrial

Poor diversification

The 3 months correlation between Sabra and STAG is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Healthcare REIT and STAG Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAG Industrial 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 STAG Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STAG Industrial has no effect on the direction of Sabra Healthcare i.e., Sabra Healthcare and STAG Industrial go up and down completely randomly.

Pair Corralation between Sabra Healthcare and STAG Industrial

Given the investment horizon of 90 days Sabra Healthcare REIT is expected to under-perform the STAG Industrial. In addition to that, Sabra Healthcare is 1.22 times more volatile than STAG Industrial. It trades about -0.08 of its total potential returns per unit of risk. STAG Industrial is currently generating about 0.01 per unit of volatility. If you would invest  3,601  in STAG Industrial on December 1, 2024 and sell it today you would lose (3.00) from holding STAG Industrial or give up 0.08% 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.  STAG Industrial

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.

STAG Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days STAG Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, STAG Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sabra Healthcare and STAG Industrial

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

The idea behind Sabra Healthcare REIT and STAG Industrial 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.