Correlation Between Sabra Healthcare and MSAD Insurance

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

Diversification Opportunities for Sabra Healthcare and MSAD Insurance

0.77

Correlation Coefficient

Sabra Healthcare  MSAD Insurance

Poor diversification

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

Pair Corralation between Sabra Healthcare and MSAD Insurance

Given the investment horizon of 90 days Sabra Healthcare REIT is expected to under-perform the MSAD Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Sabra Healthcare REIT is 1.41 times less risky than MSAD Insurance. The stock trades about -0.21 of its potential returns per unit of risk. The MSAD Insurance Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,780  in MSAD Insurance Group on January 28, 2024 and sell it today you would earn a total of  15.00  from holding MSAD Insurance Group or generate 0.84% 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.  MSAD Insurance Group

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.

MSAD Insurance Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MSAD Insurance Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, MSAD Insurance showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabra Healthcare and MSAD Insurance

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

The idea behind Sabra Healthcare REIT and MSAD Insurance 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.