Correlation Between Sabra Healthcare and Nasdaq

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

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

Diversification Opportunities for Sabra Healthcare and Nasdaq

0.61

Correlation Coefficient

Sabra Healthcare  Nasdaq

Poor diversification

The 3 months correlation between Sabra and Nasdaq is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Healthcare REIT and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc and Sabra Healthcare 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 Healthcare REIT are associated (or correlated) with Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Sabra Healthcare i.e., Sabra Healthcare and Nasdaq go up and down completely randomly.

Pair Corralation between Sabra Healthcare and Nasdaq

Given the investment horizon of 90 days Sabra Healthcare is expected to generate 1.2 times less return on investment than Nasdaq. In addition to that, Sabra Healthcare is 1.58 times more volatile than Nasdaq Inc. It trades about 0.13 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.25 per unit of volatility. If you would invest  7,115  in Nasdaq Inc on August 31, 2024 and sell it today you would earn a total of  1,190  from holding Nasdaq Inc or generate 16.73% return on investment over 90 days.

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

Sabra Healthcare REIT  vs.  Nasdaq Inc

Sabra Healthcare REIT

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Healthcare REIT are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Sabra Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Nasdaq Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabra Healthcare and Nasdaq

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

The idea behind Sabra Healthcare REIT and Nasdaq Inc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.