Correlation Between Atlantic American and Sabra Healthcare

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

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

Diversification Opportunities for Atlantic American and Sabra Healthcare

0.14

Correlation Coefficient

Atlantic American  Sabra Healthcare

Average diversification

The 3 months correlation between Atlantic and Sabra is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic American and Sabra Healthcare REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabra Healthcare REIT and Atlantic American 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 Atlantic American are associated (or correlated) with Sabra Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabra Healthcare REIT has no effect on the direction of Atlantic American i.e., Atlantic American and Sabra Healthcare go up and down completely randomly.

Pair Corralation between Atlantic American and Sabra Healthcare

Given the investment horizon of 90 days Atlantic American is expected to under-perform the Sabra Healthcare. In addition to that, Atlantic American is 3.68 times more volatile than Sabra Healthcare REIT. It trades about -0.34 of its total potential returns per unit of risk. Sabra Healthcare REIT is currently generating about -0.2 per unit of volatility. If you would invest  1,471  in Sabra Healthcare REIT on January 29, 2024 and sell it today you would lose (77.00) from holding Sabra Healthcare REIT or give up 5.23% of portfolio value over 90 days.

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

Atlantic American  vs.  Sabra Healthcare REIT

Atlantic American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlantic American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Sabra Healthcare REIT

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Healthcare REIT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sabra Healthcare is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Atlantic American and Sabra Healthcare

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

The idea behind Atlantic American and Sabra Healthcare REIT 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.