Correlation Between WILLIS LEASE and Sabra Health

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

By analyzing existing cross correlation between WILLIS LEASE FIN and Sabra Health Care, you can compare the effects of market volatilities on WILLIS LEASE and Sabra Health 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 WILLIS LEASE with a short position of Sabra Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of WILLIS LEASE and Sabra Health.

Diversification Opportunities for WILLIS LEASE and Sabra Health

0.67

Correlation Coefficient

WILLIS LEASE  Sabra Health

Poor diversification

The 3 months correlation between WILLIS and Sabra is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and Sabra Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabra Health Care and WILLIS LEASE 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 WILLIS LEASE FIN are associated (or correlated) with Sabra Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabra Health Care has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and Sabra Health go up and down completely randomly.

Pair Corralation between WILLIS LEASE and Sabra Health

Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 1.56 times more return on investment than Sabra Health. However, WILLIS LEASE is 1.56 times more volatile than Sabra Health Care. It trades about 0.01 of its potential returns per unit of risk. Sabra Health Care is currently generating about -0.04 per unit of risk. If you would invest  5,804  in WILLIS LEASE FIN on March 16, 2024 and sell it today you would lose (4.00) from holding WILLIS LEASE FIN or give up 0.07% of portfolio value over 90 days.

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

WILLIS LEASE FIN  vs.  Sabra Health Care

WILLIS LEASE FIN

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

Sabra Health Care

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sabra Health Care are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with WILLIS LEASE and Sabra Health

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

The idea behind WILLIS LEASE FIN and Sabra Health Care 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 Stocks Directory module to find actively traded stocks across global markets.