Correlation Between SBA Communications and VIVA WINE

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

Diversification Opportunities for SBA Communications and VIVA WINE

0.7

Correlation Coefficient

SBA Communications  VIVA WINE

Poor diversification

The 3 months correlation between SBA and VIVA is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and VIVA WINE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIVA WINE GROUP 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 VIVA WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIVA WINE GROUP has no effect on the direction of SBA Communications i.e., SBA Communications and VIVA WINE go up and down completely randomly.

Pair Corralation between SBA Communications and VIVA WINE

Assuming the 90 days trading horizon SBA Communications is expected to generate 4.83 times less return on investment than VIVA WINE. But when comparing it to its historical volatility, SBA Communications Corp is 1.21 times less risky than VIVA WINE. It trades about 0.04 of its potential returns per unit of risk. VIVA WINE GROUP is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  322.00  in VIVA WINE GROUP on December 28, 2024 and sell it today you would earn a total of  52.00  from holding VIVA WINE GROUP or generate 16.15% return on investment over 90 days.

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

SBA Communications Corp  vs.  VIVA WINE GROUP

SBA Communications Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBA Communications Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SBA Communications is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

VIVA WINE GROUP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VIVA WINE GROUP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, VIVA WINE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBA Communications and VIVA WINE

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

The idea behind SBA Communications Corp and VIVA WINE GROUP 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.