Correlation Between First Industrial and SBA Communications

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

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

Diversification Opportunities for First Industrial and SBA Communications

0.66

Correlation Coefficient

First Industrial  SBA Communications

Poor diversification

The 3 months correlation between First and SBA is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty 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 First Industrial 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 First Industrial Realty 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 First Industrial i.e., First Industrial and SBA Communications go up and down completely randomly.

Pair Corralation between First Industrial and SBA Communications

Allowing for the 90-day total investment horizon First Industrial Realty is expected to under-perform the SBA Communications. But the stock apears to be less risky and, when comparing its historical volatility, First Industrial Realty is 1.32 times less risky than SBA Communications. The stock trades about -0.08 of its potential returns per unit of risk. The SBA Communications Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  22,977  in SBA Communications Corp on September 3, 2024 and sell it today you would lose (683.00) from holding SBA Communications Corp or give up 2.97% of portfolio value over 90 days.

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

First Industrial Realty  vs.  SBA Communications Corp

First Industrial Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Industrial Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, First Industrial is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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 rather sound basic indicators, SBA Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Industrial and SBA Communications

The main advantage of trading using opposite First Industrial and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial 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 First Industrial Realty 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.