Correlation Between Cardinal Health and Sabra Health

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

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

Diversification Opportunities for Cardinal Health and Sabra Health

0.65

Correlation Coefficient

Cardinal Health  Sabra Health

Poor diversification

The 3 months correlation between Cardinal and Sabra is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health 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 Cardinal Health 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 Cardinal Health 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 Cardinal Health i.e., Cardinal Health and Sabra Health go up and down completely randomly.

Pair Corralation between Cardinal Health and Sabra Health

Assuming the 90 days horizon Cardinal Health is expected to generate 1.37 times less return on investment than Sabra Health. In addition to that, Cardinal Health is 1.01 times more volatile than Sabra Health Care. It trades about 0.11 of its total potential returns per unit of risk. Sabra Health Care is currently generating about 0.15 per unit of volatility. If you would invest  1,496  in Sabra Health Care on September 4, 2024 and sell it today you would earn a total of  276.00  from holding Sabra Health Care or generate 18.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Cardinal Health  vs.  Sabra Health Care

Cardinal Health

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Sabra Health Care

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Cardinal Health and Sabra Health

The main advantage of trading using opposite Cardinal Health and Sabra Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health 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 Cardinal Health 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.