Correlation Between AVITA Medical and Sabra Health

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

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

Diversification Opportunities for AVITA Medical and Sabra Health

0.6

Correlation Coefficient

AVITA Medical  Sabra Health

Poor diversification

The 3 months correlation between AVITA and Sabra is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding AVITA Medical 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 AVITA Medical 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 AVITA Medical 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 AVITA Medical i.e., AVITA Medical and Sabra Health go up and down completely randomly.

Pair Corralation between AVITA Medical and Sabra Health

Assuming the 90 days trading horizon AVITA Medical is expected to generate 1.94 times more return on investment than Sabra Health. However, AVITA Medical is 1.94 times more volatile than Sabra Health Care. It trades about 0.16 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  173.00  in AVITA Medical on September 17, 2024 and sell it today you would earn a total of  65.00  from holding AVITA Medical or generate 37.57% return on investment over 90 days.

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

AVITA Medical  vs.  Sabra Health Care

AVITA Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AVITA Medical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, AVITA Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Sabra Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with AVITA Medical and Sabra Health

The main advantage of trading using opposite AVITA Medical and Sabra Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVITA Medical 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 AVITA Medical 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.