Correlation Between SBA Communications and Avanos Medical

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

Diversification Opportunities for SBA Communications and Avanos Medical

0.77

Correlation Coefficient

SBA Communications  Avanos Medical

Poor diversification

The 3 months correlation between SBA and Avanos is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and Avanos Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanos Medical 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 Avanos Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanos Medical has no effect on the direction of SBA Communications i.e., SBA Communications and Avanos Medical go up and down completely randomly.

Pair Corralation between SBA Communications and Avanos Medical

Assuming the 90 days trading horizon SBA Communications Corp is expected to generate 0.53 times more return on investment than Avanos Medical. However, SBA Communications Corp is 1.9 times less risky than Avanos Medical. It trades about -0.06 of its potential returns per unit of risk. Avanos Medical is currently generating about -0.14 per unit of risk. If you would invest  20,930  in SBA Communications Corp on September 26, 2024 and sell it today you would lose (1,415) from holding SBA Communications Corp or give up 6.76% of portfolio value over 90 days.

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

SBA Communications Corp  vs.  Avanos Medical

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

Avanos Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avanos Medical 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 comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with SBA Communications and Avanos Medical

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

The idea behind SBA Communications Corp and Avanos Medical 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.