Correlation Between Sabra Healthcare and Welltower

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

Diversification Opportunities for Sabra Healthcare and Welltower

0.21

Correlation Coefficient

Sabra Healthcare  Welltower

Modest diversification

The 3 months correlation between Sabra and Welltower is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Healthcare REIT and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower 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 Welltower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welltower has no effect on the direction of Sabra Healthcare i.e., Sabra Healthcare and Welltower go up and down completely randomly.

Pair Corralation between Sabra Healthcare and Welltower

Given the investment horizon of 90 days Sabra Healthcare is expected to generate 3.47 times less return on investment than Welltower. In addition to that, Sabra Healthcare is 1.15 times more volatile than Welltower. It trades about 0.05 of its total potential returns per unit of risk. Welltower is currently generating about 0.22 per unit of volatility. If you would invest  12,436  in Welltower on December 29, 2024 and sell it today you would earn a total of  2,556  from holding Welltower or generate 20.55% 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.  Welltower

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.

Welltower

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Welltower disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabra Healthcare and Welltower

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

The idea behind Sabra Healthcare REIT and Welltower 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.