Correlation Between ATT and SBA Communications

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

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

Diversification Opportunities for ATT and SBA Communications

0.29

Correlation Coefficient

ATT  SBA Communications

Modest diversification

The 3 months correlation between ATT and SBA is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and SBA Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBA Communications Corp and ATT 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 ATT Inc are associated (or correlated) with SBA Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBA Communications Corp has no effect on the direction of ATT i.e., ATT and SBA Communications go up and down completely randomly.

Pair Corralation between ATT and SBA Communications

Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.52 times more return on investment than SBA Communications. However, ATT Inc is 1.93 times less risky than SBA Communications. It trades about -0.12 of its potential returns per unit of risk. SBA Communications Corp is currently generating about -0.24 per unit of risk. If you would invest  1,693  in ATT Inc on January 20, 2024 and sell it today you would lose (42.00) from holding ATT Inc or give up 2.48% of portfolio value over 90 days.

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

ATT Inc  vs.  SBA Communications Corp

ATT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ATT is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ATT and SBA Communications

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

The idea behind ATT Inc and SBA Communications Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.