Correlation Between SBA Communications and Direct Line
Can any of the company-specific risk be diversified away by investing in both SBA Communications and Direct Line 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 Direct Line 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 Direct Line Insurance, you can compare the effects of market volatilities on SBA Communications and Direct Line 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 Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBA Communications and Direct Line.
Diversification Opportunities for SBA Communications and Direct Line
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SBA and Direct is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance 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 Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of SBA Communications i.e., SBA Communications and Direct Line go up and down completely randomly.
Pair Corralation between SBA Communications and Direct Line
Assuming the 90 days trading horizon SBA Communications Corp is expected to under-perform the Direct Line. But the stock apears to be less risky and, when comparing its historical volatility, SBA Communications Corp is 2.06 times less risky than Direct Line. The stock trades about -0.02 of its potential returns per unit of risk. The Direct Line Insurance is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 198.00 in Direct Line Insurance on September 3, 2024 and sell it today you would earn a total of 82.00 from holding Direct Line Insurance or generate 41.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBA Communications Corp vs. Direct Line Insurance
Performance |
| Timeline |
| SBA Communications Corp |
| Direct Line Insurance |
SBA Communications and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBA Communications and Direct Line
The main advantage of trading using opposite SBA Communications and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBA Communications position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| SBA Communications vs. Luckin Coffee | SBA Communications vs. REVO INSURANCE SPA | SBA Communications vs. Selective Insurance Group | SBA Communications vs. Goosehead Insurance |
| Direct Line vs. Allianz SE | Direct Line vs. Superior Plus Corp | Direct Line vs. NMI Holdings | Direct Line vs. Origin Agritech |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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