Correlation Between SBA Communications and Public Storage
Can any of the company-specific risk be diversified away by investing in both SBA Communications and Public Storage 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 Public Storage 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 Public Storage, you can compare the effects of market volatilities on SBA Communications and Public Storage 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 Public Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBA Communications and Public Storage.
Diversification Opportunities for SBA Communications and Public Storage
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SBA and Public is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and Public Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Storage 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 Public Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Storage has no effect on the direction of SBA Communications i.e., SBA Communications and Public Storage go up and down completely randomly.
Pair Corralation between SBA Communications and Public Storage
Assuming the 90 days trading horizon SBA Communications is expected to generate 2.61 times less return on investment than Public Storage. In addition to that, SBA Communications is 1.06 times more volatile than Public Storage. It trades about 0.08 of its total potential returns per unit of risk. Public Storage is currently generating about 0.22 per unit of volatility. If you would invest 30,780 in Public Storage on September 1, 2024 and sell it today you would earn a total of 2,540 from holding Public Storage or generate 8.25% 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. Public Storage
Performance |
| Timeline |
| SBA Communications Corp |
| Public Storage |
SBA Communications and Public Storage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBA Communications and Public Storage
The main advantage of trading using opposite SBA Communications and Public Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBA Communications position performs unexpectedly, Public Storage 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 Public Storage will offset losses from the drop in Public Storage's long position.The idea behind SBA Communications Corp and Public Storage 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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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 Stocks Directory module to find actively traded stocks across global markets.
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