Correlation Between EMBARK EDUCATION and SBA Communications

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

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

Diversification Opportunities for EMBARK EDUCATION and SBA Communications

0.27

Correlation Coefficient

EMBARK EDUCATION  SBA Communications

Modest diversification

The 3 months correlation between EMBARK and SBA is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding EMBARK EDUCATION LTD 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 EMBARK EDUCATION 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 EMBARK EDUCATION LTD 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 EMBARK EDUCATION i.e., EMBARK EDUCATION and SBA Communications go up and down completely randomly.

Pair Corralation between EMBARK EDUCATION and SBA Communications

Assuming the 90 days horizon EMBARK EDUCATION is expected to generate 2.03 times less return on investment than SBA Communications. But when comparing it to its historical volatility, EMBARK EDUCATION LTD is 3.97 times less risky than SBA Communications. It trades about 0.13 of its potential returns per unit of risk. SBA Communications Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  20,323  in SBA Communications Corp on September 1, 2024 and sell it today you would earn a total of  1,257  from holding SBA Communications Corp or generate 6.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

EMBARK EDUCATION LTD  vs.  SBA Communications Corp

EMBARK EDUCATION LTD

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMBARK EDUCATION LTD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EMBARK EDUCATION is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

SBA Communications Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBA Communications Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SBA Communications may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with EMBARK EDUCATION and SBA Communications

The main advantage of trading using opposite EMBARK EDUCATION and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMBARK EDUCATION 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 EMBARK EDUCATION LTD 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.