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

0.23

Correlation Coefficient

Sabra Healthcare  STAG Industrial

Modest diversification

The 3 months correlation between Sabra and STAG is 0.23. 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 is expected to generate 1.53 times less return on investment than STAG Industrial. In addition to that, Sabra Healthcare is 1.23 times more volatile than STAG Industrial. It trades about 0.04 of its total potential returns per unit of risk. STAG Industrial is currently generating about 0.08 per unit of volatility. If you would invest  3,350  in STAG Industrial on December 27, 2024 and sell it today you would earn a total of  196.00  from holding STAG Industrial or generate 5.85% return on investment over 90 days.

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

Sabra Healthcare REIT  vs.  STAG Industrial

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 3 (%) 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.

STAG Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STAG Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, STAG Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

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.