Correlation Between Sabra Health and Games Workshop

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

Diversification Opportunities for Sabra Health and Games Workshop

0.77

Correlation Coefficient

Sabra Health  Games Workshop

Poor diversification

The 3 months correlation between Sabra and Games is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and Games Workshop Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Games Workshop Group 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 Games Workshop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Games Workshop Group has no effect on the direction of Sabra Health i.e., Sabra Health and Games Workshop go up and down completely randomly.

Pair Corralation between Sabra Health and Games Workshop

Assuming the 90 days horizon Sabra Health is expected to generate 12.06 times less return on investment than Games Workshop. But when comparing it to its historical volatility, Sabra Health Care is 2.17 times less risky than Games Workshop. It trades about 0.04 of its potential returns per unit of risk. Games Workshop Group is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  14,000  in Games Workshop Group on September 1, 2024 and sell it today you would earn a total of  2,900  from holding Games Workshop Group or generate 20.71% return on investment over 90 days.

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

Sabra Health Care  vs.  Games Workshop Group

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 uncertain basic indicators, Sabra Health reported solid returns over the last few months and may actually be approaching a breakup point.

Games Workshop Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Games Workshop unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabra Health and Games Workshop

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

The idea behind Sabra Health Care and Games Workshop Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.