Correlation Between Sabra Health and NMI Holdings

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

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

Diversification Opportunities for Sabra Health and NMI Holdings

-0.15

Correlation Coefficient

Sabra Health  NMI Holdings

Good diversification

The 3 months correlation between Sabra and NMI is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Sabra 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 Sabra Health Care are associated (or correlated) with NMI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMI Holdings has no effect on the direction of Sabra Health i.e., Sabra Health and NMI Holdings go up and down completely randomly.

Pair Corralation between Sabra Health and NMI Holdings

Assuming the 90 days horizon Sabra Health Care is expected to generate 1.03 times more return on investment than NMI Holdings. However, Sabra Health is 1.03 times more volatile than NMI Holdings. It trades about 0.12 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.08 per unit of risk. If you would invest  979.00  in Sabra Health Care on September 12, 2024 and sell it today you would earn a total of  721.00  from holding Sabra Health Care or generate 73.65% return on investment over 90 days.

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

Sabra Health Care  vs.  NMI Holdings

Sabra Health Care

Risk-Adjusted Performance

5 of 100

Modest

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

NMI Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NMI Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NMI Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sabra Health and NMI Holdings

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

The idea behind Sabra Health Care and NMI Holdings 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.