Correlation Between Industrial and SBA Communications

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Can any of the company-specific risk be diversified away by investing in both Industrial 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 Industrial and SBA Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial and Commercial and SBA Communications Corp, you can compare the effects of market volatilities on Industrial 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 Industrial with a short position of SBA Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and SBA Communications.

Diversification Opportunities for Industrial and SBA Communications

IndustrialSBADiversified AwayIndustrialSBADiversified Away100%
-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Industrial and SBA is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial 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 Industrial 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 Industrial and Commercial 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 Industrial i.e., Industrial and SBA Communications go up and down completely randomly.

Pair Corralation between Industrial and SBA Communications

Assuming the 90 days horizon Industrial and Commercial is expected to generate 1.86 times more return on investment than SBA Communications. However, Industrial is 1.86 times more volatile than SBA Communications Corp. It trades about 0.09 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  49.00  in Industrial and Commercial on September 20, 2024 and sell it today you would earn a total of  8.00  from holding Industrial and Commercial or generate 16.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Industrial and Commercial  vs.  SBA Communications Corp

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -505101520
JavaScript chart by amCharts 3.21.15ICK 4SB
       Timeline  
Industrial and Commercial 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec0.520.530.540.550.560.570.580.590.60.61
SBA Communications Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec200205210215220225

Industrial and SBA Communications Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-9.28-6.95-4.62-2.29-0.03882.364.797.239.6712.1 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15ICK 4SB
       Returns  

Pair Trading with Industrial and SBA Communications

The main advantage of trading using opposite Industrial and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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 Industrial and Commercial 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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