Correlation Between SBA Communications and Japan Steel

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

Diversification Opportunities for SBA Communications and Japan Steel

-0.44

Correlation Coefficient

SBA Communications  Japan Steel

Very good diversification

The 3 months correlation between SBA and Japan is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and The Japan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Steel 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 Japan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Steel has no effect on the direction of SBA Communications i.e., SBA Communications and Japan Steel go up and down completely randomly.

Pair Corralation between SBA Communications and Japan Steel

Assuming the 90 days trading horizon SBA Communications is expected to generate 21.71 times less return on investment than Japan Steel. But when comparing it to its historical volatility, SBA Communications Corp is 1.62 times less risky than Japan Steel. It trades about 0.01 of its potential returns per unit of risk. The Japan Steel is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,620  in The Japan Steel on April 20, 2025 and sell it today you would earn a total of  1,080  from holding The Japan Steel or generate 29.83% return on investment over 90 days.

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

SBA Communications Corp  vs.  The Japan Steel

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.

Japan Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Japan Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBA Communications and Japan Steel

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

The idea behind SBA Communications Corp and The Japan Steel 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.