Correlation Between SBA Communications and SolarEdge Technologies

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

Diversification Opportunities for SBA Communications and SolarEdge Technologies

0.41

Correlation Coefficient

SBA Communications  SolarEdge Technologies

Very weak diversification

The 3 months correlation between SBA and SolarEdge is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and SolarEdge Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolarEdge Technologies 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 SolarEdge Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolarEdge Technologies has no effect on the direction of SBA Communications i.e., SBA Communications and SolarEdge Technologies go up and down completely randomly.

Pair Corralation between SBA Communications and SolarEdge Technologies

Assuming the 90 days trading horizon SBA Communications Corp is expected to under-perform the SolarEdge Technologies. But the stock apears to be less risky and, when comparing its historical volatility, SBA Communications Corp is 9.15 times less risky than SolarEdge Technologies. The stock trades about -0.2 of its potential returns per unit of risk. The SolarEdge Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,034  in SolarEdge Technologies on September 17, 2024 and sell it today you would earn a total of  160.00  from holding SolarEdge Technologies or generate 15.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

SBA Communications Corp  vs.  SolarEdge Technologies

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.

SolarEdge Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SolarEdge Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SBA Communications and SolarEdge Technologies

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

The idea behind SBA Communications Corp and SolarEdge Technologies 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.