Correlation Between SBA Communications and LIFEWAY FOODS

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

Diversification Opportunities for SBA Communications and LIFEWAY FOODS

0.34

Correlation Coefficient

SBA Communications  LIFEWAY FOODS

Weak diversification

The 3 months correlation between SBA and LIFEWAY is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and LIFEWAY FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFEWAY FOODS 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 LIFEWAY FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFEWAY FOODS has no effect on the direction of SBA Communications i.e., SBA Communications and LIFEWAY FOODS go up and down completely randomly.

Pair Corralation between SBA Communications and LIFEWAY FOODS

Assuming the 90 days trading horizon SBA Communications Corp is expected to generate 0.5 times more return on investment than LIFEWAY FOODS. However, SBA Communications Corp is 2.01 times less risky than LIFEWAY FOODS. It trades about 0.08 of its potential returns per unit of risk. LIFEWAY FOODS is currently generating about -0.05 per unit of risk. If you would invest  20,980  in SBA Communications Corp on September 1, 2024 and sell it today you would earn a total of  600.00  from holding SBA Communications Corp or generate 2.86% return on investment over 90 days.

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

SBA Communications Corp  vs.  LIFEWAY FOODS

SBA Communications Corp

Risk-Adjusted Performance

5 of 100

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.

LIFEWAY FOODS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LIFEWAY FOODS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, LIFEWAY FOODS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBA Communications and LIFEWAY FOODS

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

The idea behind SBA Communications Corp and LIFEWAY FOODS 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.