Correlation Between SBA Communications and Gear Energy

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

Diversification Opportunities for SBA Communications and Gear Energy

0.67

Correlation Coefficient

SBA Communications  Gear Energy

Poor diversification

The 3 months correlation between SBA and Gear is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy 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 Gear Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear Energy has no effect on the direction of SBA Communications i.e., SBA Communications and Gear Energy go up and down completely randomly.

Pair Corralation between SBA Communications and Gear Energy

Assuming the 90 days trading horizon SBA Communications Corp is expected to generate 0.28 times more return on investment than Gear Energy. However, SBA Communications Corp is 3.53 times less risky than Gear Energy. It trades about -0.42 of its potential returns per unit of risk. Gear Energy is currently generating about -0.15 per unit of risk. If you would invest  21,240  in SBA Communications Corp on October 1, 2024 and sell it today you would lose (1,735) from holding SBA Communications Corp or give up 8.17% 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.  Gear Energy

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Gear Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SBA Communications and Gear Energy

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

The idea behind SBA Communications Corp and Gear Energy 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 Anywhere module to track or share privately all of your investments from the convenience of any device.