Correlation Between Telephone and SBA Communications

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

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

Diversification Opportunities for Telephone and SBA Communications

0.41

Correlation Coefficient

Telephone  SBA Communications

Very weak diversification

The 3 months correlation between Telephone and SBA is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Telephone and Data 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 Telephone 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 Telephone and Data 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 Telephone i.e., Telephone and SBA Communications go up and down completely randomly.

Pair Corralation between Telephone and SBA Communications

Considering the 90-day investment horizon Telephone and Data is expected to generate 3.36 times more return on investment than SBA Communications. However, Telephone is 3.36 times more volatile than SBA Communications Corp. It trades about 0.04 of its potential returns per unit of risk. SBA Communications Corp is currently generating about -0.06 per unit of risk. If you would invest  1,084  in Telephone and Data on February 5, 2024 and sell it today you would earn a total of  352.00  from holding Telephone and Data or generate 32.47% return on investment over 90 days.

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

Telephone and Data  vs.  SBA Communications Corp

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 unsteady 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.

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.

Pair Trading with Telephone and SBA Communications

The main advantage of trading using opposite Telephone and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telephone 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 Telephone and Data 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.