Correlation Between SBA Communications and CARSALESCOM

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

Diversification Opportunities for SBA Communications and CARSALESCOM

0.2

Correlation Coefficient

SBA Communications  CARSALESCOM

Modest diversification

The 3 months correlation between SBA and CARSALESCOM is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of SBA Communications i.e., SBA Communications and CARSALESCOM go up and down completely randomly.

Pair Corralation between SBA Communications and CARSALESCOM

Assuming the 90 days trading horizon SBA Communications Corp is expected to under-perform the CARSALESCOM. In addition to that, SBA Communications is 1.04 times more volatile than CARSALESCOM. It trades about -0.1 of its total potential returns per unit of risk. CARSALESCOM is currently generating about 0.01 per unit of volatility. If you would invest  2,260  in CARSALESCOM on October 13, 2024 and sell it today you would earn a total of  0.00  from holding CARSALESCOM or generate 0.0% 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.  CARSALESCOM

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.

CARSALESCOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SBA Communications and CARSALESCOM

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

The idea behind SBA Communications Corp and CARSALESCOM 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.