Correlation Between SBA Communications and Digital Realty

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

Diversification Opportunities for SBA Communications and Digital Realty

-0.82

Correlation Coefficient

SBA Communications  Digital Realty

Pay attention - limited upside

The 3 months correlation between SBA and Digital is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and Digital Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Realty Trust 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 Digital Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Realty Trust has no effect on the direction of SBA Communications i.e., SBA Communications and Digital Realty go up and down completely randomly.

Pair Corralation between SBA Communications and Digital Realty

Given the investment horizon of 90 days SBA Communications Corp is expected to generate 0.73 times more return on investment than Digital Realty. However, SBA Communications Corp is 1.37 times less risky than Digital Realty. It trades about 0.08 of its potential returns per unit of risk. Digital Realty Trust is currently generating about -0.14 per unit of risk. If you would invest  20,216  in SBA Communications Corp on December 27, 2024 and sell it today you would earn a total of  1,422  from holding SBA Communications Corp or generate 7.03% return on investment over 90 days.

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

SBA Communications Corp  vs.  Digital Realty Trust

SBA Communications Corp

Risk-Adjusted Performance

Modest

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 weak basic indicators, SBA Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Digital Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digital Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with SBA Communications and Digital Realty

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

The idea behind SBA Communications Corp and Digital Realty Trust 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.