Correlation Between Sabra Health and MeVis Medical

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

Diversification Opportunities for Sabra Health and MeVis Medical

0.52

Correlation Coefficient

Sabra Health  MeVis Medical

Very weak diversification

The 3 months correlation between Sabra and MeVis is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and MeVis Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MeVis Medical Solutions 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 MeVis Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MeVis Medical Solutions has no effect on the direction of Sabra Health i.e., Sabra Health and MeVis Medical go up and down completely randomly.

Pair Corralation between Sabra Health and MeVis Medical

Assuming the 90 days horizon Sabra Health is expected to generate 6.74 times less return on investment than MeVis Medical. In addition to that, Sabra Health is 2.05 times more volatile than MeVis Medical Solutions. It trades about 0.01 of its total potential returns per unit of risk. MeVis Medical Solutions is currently generating about 0.14 per unit of volatility. If you would invest  2,280  in MeVis Medical Solutions on September 17, 2024 and sell it today you would earn a total of  180.00  from holding MeVis Medical Solutions or generate 7.89% return on investment over 90 days.

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

Sabra Health Care  vs.  MeVis Medical Solutions

Sabra Health Care

Risk-Adjusted Performance

0 of 100

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.

MeVis Medical Solutions

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MeVis Medical Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MeVis Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sabra Health and MeVis Medical

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

The idea behind Sabra Health Care and MeVis Medical Solutions 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.