Correlation Between SBC Communications and SBC Medical

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

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

Diversification Opportunities for SBC Communications and SBC Medical

-0.12

Correlation Coefficient

SBC Communications  SBC Medical

Good diversification

The 3 months correlation between SBC and SBC is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding SBC Communications and SBC Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBC Medical Group and SBC 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 SBC Communications are associated (or correlated) with SBC Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBC Medical Group has no effect on the direction of SBC Communications i.e., SBC Communications and SBC Medical go up and down completely randomly.

Pair Corralation between SBC Communications and SBC Medical

Considering the 90-day investment horizon SBC Communications is expected to under-perform the SBC Medical. But the stock apears to be less risky and, when comparing its historical volatility, SBC Communications is 1.24 times less risky than SBC Medical. The stock trades about -0.15 of its potential returns per unit of risk. The SBC Medical Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  26.00  in SBC Medical Group on October 23, 2024 and sell it today you would lose (1.00) from holding SBC Medical Group or give up 3.85% of portfolio value over 90 days.

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

SBC Communications  vs.  SBC Medical Group

SBC Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBC Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SBC Medical Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBC Medical Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SBC Medical is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SBC Communications and SBC Medical

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

The idea behind SBC Communications and SBC Medical Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.