Correlation Between EBay and SBA Communications

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

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

Diversification Opportunities for EBay and SBA Communications

0.44

Correlation Coefficient

EBay  SBA Communications

Very weak diversification

The 3 months correlation between EBay and SBA is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc 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 EBay 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 eBay Inc 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 EBay i.e., EBay and SBA Communications go up and down completely randomly.

Pair Corralation between EBay and SBA Communications

Assuming the 90 days trading horizon eBay Inc is expected to generate 1.02 times more return on investment than SBA Communications. However, EBay is 1.02 times more volatile than SBA Communications Corp. It trades about 0.11 of its potential returns per unit of risk. SBA Communications Corp is currently generating about 0.05 per unit of risk. If you would invest  5,341  in eBay Inc on September 3, 2024 and sell it today you would earn a total of  615.00  from holding eBay Inc or generate 11.51% return on investment over 90 days.

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

eBay Inc  vs.  SBA Communications Corp

eBay Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EBay may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SBA Communications Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBA Communications Corp are ranked lower than 3 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with EBay and SBA Communications

The main advantage of trading using opposite EBay and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay 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 eBay Inc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..