Correlation Between Verizon Communications and SBA Communications

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

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

Diversification Opportunities for Verizon Communications and SBA Communications

0.23

Correlation Coefficient

Verizon Communications  SBA Communications

Modest diversification

The 3 months correlation between Verizon and SBA is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications 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 Verizon 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and SBA Communications go up and down completely randomly.

Pair Corralation between Verizon Communications and SBA Communications

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.82 times more return on investment than SBA Communications. However, Verizon Communications is 1.22 times less risky than SBA Communications. It trades about -0.03 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  4,022  in Verizon Communications on January 24, 2024 and sell it today you would lose (52.00) from holding Verizon Communications or give up 1.29% of portfolio value over 90 days.

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

Verizon Communications  vs.  SBA Communications Corp

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Verizon Communications is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the 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 Verizon Communications and SBA Communications

The main advantage of trading using opposite Verizon Communications and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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 Verizon Communications 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.