Correlation Between Sabra Health and Omega Healthcare

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

Diversification Opportunities for Sabra Health and Omega Healthcare

0.86

Correlation Coefficient

Sabra Health  Omega Healthcare

Very poor diversification

The 3 months correlation between Sabra and Omega is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and Omega Healthcare Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omega Healthcare Inv 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 Omega Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omega Healthcare Inv has no effect on the direction of Sabra Health i.e., Sabra Health and Omega Healthcare go up and down completely randomly.

Pair Corralation between Sabra Health and Omega Healthcare

Assuming the 90 days horizon Sabra Health Care is expected to under-perform the Omega Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Sabra Health Care is 1.03 times less risky than Omega Healthcare. The stock trades about -0.1 of its potential returns per unit of risk. The Omega Healthcare Investors is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,872  in Omega Healthcare Investors on September 12, 2024 and sell it today you would lose (131.00) from holding Omega Healthcare Investors or give up 3.38% of portfolio value over 90 days.

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

Sabra Health Care  vs.  Omega Healthcare Investors

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.

Omega Healthcare Inv

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Omega Healthcare Investors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Omega Healthcare 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 Omega Healthcare

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

The idea behind Sabra Health Care and Omega Healthcare Investors 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.