Correlation Between SBA Communications and INVITATION HOMES

Can any of the company-specific risk be diversified away by investing in both SBA Communications and INVITATION HOMES 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 INVITATION HOMES 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 INVITATION HOMES DL, you can compare the effects of market volatilities on SBA Communications and INVITATION HOMES 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 INVITATION HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBA Communications and INVITATION HOMES.

Diversification Opportunities for SBA Communications and INVITATION HOMES

0.55

Correlation Coefficient

SBA Communications  INVITATION HOMES

Very weak diversification

The 3 months correlation between SBA and INVITATION is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and INVITATION HOMES DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVITATION HOMES 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 INVITATION HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INVITATION HOMES has no effect on the direction of SBA Communications i.e., SBA Communications and INVITATION HOMES go up and down completely randomly.

Pair Corralation between SBA Communications and INVITATION HOMES

Assuming the 90 days trading horizon SBA Communications Corp is expected to generate 1.56 times more return on investment than INVITATION HOMES. However, SBA Communications is 1.56 times more volatile than INVITATION HOMES DL. It trades about -0.02 of its potential returns per unit of risk. INVITATION HOMES DL is currently generating about -0.09 per unit of risk. If you would invest  20,491  in SBA Communications Corp on April 23, 2025 and sell it today you would lose (511.00) from holding SBA Communications Corp or give up 2.49% 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.  INVITATION HOMES DL

SBA Communications Corp

Risk-Adjusted Performance

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 comparatively stable basic indicators, SBA Communications is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

INVITATION HOMES

Risk-Adjusted Performance

Very Weak

Over the last 90 days INVITATION HOMES DL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SBA Communications and INVITATION HOMES

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

The idea behind SBA Communications Corp and INVITATION HOMES DL 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..