Correlation Between APPLIED MATERIALS and SBA Communications

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

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

Diversification Opportunities for APPLIED MATERIALS and SBA Communications

-0.11

Correlation Coefficient

APPLIED MATERIALS  SBA Communications

Good diversification

The 3 months correlation between APPLIED and SBA is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and SBA Communications go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and SBA Communications

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.45 times more return on investment than SBA Communications. However, APPLIED MATERIALS is 1.45 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 0.02 per unit of risk. If you would invest  12,489  in APPLIED MATERIALS on September 1, 2024 and sell it today you would earn a total of  4,043  from holding APPLIED MATERIALS or generate 32.37% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  SBA Communications Corp

APPLIED MATERIALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APPLIED MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, APPLIED MATERIALS 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

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 APPLIED MATERIALS and SBA Communications

The main advantage of trading using opposite APPLIED MATERIALS and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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 APPLIED MATERIALS 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.