Correlation Between SBA Communications and EBay

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

Diversification Opportunities for SBA Communications and EBay

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between SBA and EBay is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of SBA Communications i.e., SBA Communications and EBay go up and down completely randomly.

Pair Corralation between SBA Communications and EBay

Assuming the 90 days trading horizon SBA Communications is expected to generate 1.97 times less return on investment than EBay. But when comparing it to its historical volatility, SBA Communications Corp is 1.0 times less risky than EBay. It trades about 0.06 of its potential returns per unit of risk. eBay Inc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,322  in eBay Inc on September 1, 2024 and sell it today you would earn a total of  726.00  from holding eBay Inc or generate 13.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.48%
ValuesDaily Returns

SBA Communications Corp  vs.  eBay Inc

 Performance 
       Timeline  
SBA Communications Corp 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
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.
eBay Inc 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EBay unveiled solid returns over the last few months and may actually be approaching a breakup point.

SBA Communications and EBay Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SBA Communications and EBay

The main advantage of trading using opposite SBA Communications and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBA Communications position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.
The idea behind SBA Communications Corp and eBay Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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