Correlation Between UNITED UTILITIES and Sabra Health

Can any of the company-specific risk be diversified away by investing in both UNITED UTILITIES and Sabra 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 UNITED UTILITIES and Sabra Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UNITED UTILITIES GR and Sabra Health Care, you can compare the effects of market volatilities on UNITED UTILITIES and Sabra 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 UNITED UTILITIES with a short position of Sabra Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED UTILITIES and Sabra Health.

Diversification Opportunities for UNITED UTILITIES and Sabra Health

0.46

Correlation Coefficient

UNITED UTILITIES  Sabra Health

Very weak diversification

The 3 months correlation between UNITED and Sabra is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and Sabra Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabra Health Care and UNITED UTILITIES 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 UNITED UTILITIES GR are associated (or correlated) with Sabra Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabra Health Care has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Sabra Health go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and Sabra Health

Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to generate 0.74 times more return on investment than Sabra Health. However, UNITED UTILITIES GR is 1.36 times less risky than Sabra Health. It trades about 0.02 of its potential returns per unit of risk. Sabra Health Care is currently generating about -0.01 per unit of risk. If you would invest  1,244  in UNITED UTILITIES GR on October 6, 2024 and sell it today you would earn a total of  6.00  from holding UNITED UTILITIES GR or generate 0.48% return on investment over 90 days.

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

UNITED UTILITIES GR  vs.  Sabra Health Care

UNITED UTILITIES

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED UTILITIES GR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, UNITED UTILITIES is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sabra Health Care

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Health Care are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sabra Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UNITED UTILITIES and Sabra Health

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

The idea behind UNITED UTILITIES GR and Sabra Health Care 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.