Correlation Between BANK CENTRAL and SBA Communications

Can any of the company-specific risk be diversified away by investing in both BANK CENTRAL and SBA Communications 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 BANK CENTRAL and SBA Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BANK CENTRAL ASIA and SBA Communications Corp, you can compare the effects of market volatilities on BANK CENTRAL and SBA Communications 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 BANK CENTRAL with a short position of SBA Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK CENTRAL and SBA Communications.

Diversification Opportunities for BANK CENTRAL and SBA Communications

0.71

Correlation Coefficient

BANK CENTRAL  SBA Communications

Poor diversification

The 3 months correlation between BANK and SBA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BANK CENTRAL ASIA and SBA Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBA Communications Corp and BANK CENTRAL 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 BANK CENTRAL ASIA are associated (or correlated) with SBA Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBA Communications Corp has no effect on the direction of BANK CENTRAL i.e., BANK CENTRAL and SBA Communications go up and down completely randomly.

Pair Corralation between BANK CENTRAL and SBA Communications

Assuming the 90 days trading horizon BANK CENTRAL ASIA is expected to generate 1.52 times more return on investment than SBA Communications. However, BANK CENTRAL is 1.52 times more volatile than SBA Communications Corp. It trades about -0.03 of its potential returns per unit of risk. SBA Communications Corp is currently generating about -0.07 per unit of risk. If you would invest  58.00  in BANK CENTRAL ASIA on October 8, 2024 and sell it today you would lose (2.00) from holding BANK CENTRAL ASIA or give up 3.45% of portfolio value over 90 days.

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

BANK CENTRAL ASIA  vs.  SBA Communications Corp

BANK CENTRAL ASIA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BANK CENTRAL and SBA Communications

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

The idea behind BANK CENTRAL ASIA and SBA Communications Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.