Correlation Between Sabra Health and Carlsberg

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

Diversification Opportunities for Sabra Health and Carlsberg

-0.7

Correlation Coefficient

Sabra Health  Carlsberg

Excellent diversification

The 3 months correlation between Sabra and Carlsberg is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg AS 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 Carlsberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg AS has no effect on the direction of Sabra Health i.e., Sabra Health and Carlsberg go up and down completely randomly.

Pair Corralation between Sabra Health and Carlsberg

Assuming the 90 days horizon Sabra Health Care is expected to generate 1.01 times more return on investment than Carlsberg. However, Sabra Health is 1.01 times more volatile than Carlsberg AS. It trades about 0.14 of its potential returns per unit of risk. Carlsberg AS is currently generating about -0.12 per unit of risk. If you would invest  1,247  in Sabra Health Care on September 13, 2024 and sell it today you would earn a total of  433.00  from holding Sabra Health Care or generate 34.72% return on investment over 90 days.

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

Sabra Health Care  vs.  Carlsberg AS

Sabra Health Care

Risk-Adjusted Performance

2 of 100

Weak

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sabra Health and Carlsberg

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

The idea behind Sabra Health Care and Carlsberg AS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.