Correlation Between SBA Communications and Telephone

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

By analyzing existing cross correlation between SBA Communications Corp and Telephone and Data, you can compare the effects of market volatilities on SBA Communications and Telephone 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 SBA Communications with a short position of Telephone. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBA Communications and Telephone.

Diversification Opportunities for SBA Communications and Telephone

0.41

Correlation Coefficient

SBA Communications  Telephone

Very weak diversification

The 3 months correlation between SBA and Telephone is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and Telephone and Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telephone and Data and SBA Communications 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 SBA Communications Corp are associated (or correlated) with Telephone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telephone and Data has no effect on the direction of SBA Communications i.e., SBA Communications and Telephone go up and down completely randomly.

Pair Corralation between SBA Communications and Telephone

Given the investment horizon of 90 days SBA Communications Corp is expected to under-perform the Telephone. But the stock apears to be less risky and, when comparing its historical volatility, SBA Communications Corp is 2.76 times less risky than Telephone. The stock trades about -0.04 of its potential returns per unit of risk. The Telephone and Data is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,561  in Telephone and Data on February 4, 2024 and sell it today you would lose (125.00) from holding Telephone and Data or give up 8.01% of portfolio value over 90 days.

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

SBA Communications Corp  vs.  Telephone and Data

SBA Communications Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBA Communications Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Telephone and Data

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telephone and Data has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with SBA Communications and Telephone

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

The idea behind SBA Communications Corp and Telephone and Data 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.