Correlation Between SBA Communications and Bank of China Limited
Can any of the company-specific risk be diversified away by investing in both SBA Communications and Bank of China Limited 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 Bank of China Limited 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 Bank of China, you can compare the effects of market volatilities on SBA Communications and Bank of China Limited 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 Bank of China Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBA Communications and Bank of China Limited.
Diversification Opportunities for SBA Communications and Bank of China Limited
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between SBA and Bank is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China Limited 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 Bank of China Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of China Limited has no effect on the direction of SBA Communications i.e., SBA Communications and Bank of China Limited go up and down completely randomly.
Pair Corralation between SBA Communications and Bank of China Limited
Assuming the 90 days trading horizon SBA Communications Corp is expected to generate 0.8 times more return on investment than Bank of China Limited. However, SBA Communications Corp is 1.26 times less risky than Bank of China Limited. It trades about 0.06 of its potential returns per unit of risk. Bank of China is currently generating about 0.05 per unit of risk. If you would invest 20,323 in SBA Communications Corp on September 2, 2024 and sell it today you would earn a total of 1,257 from holding SBA Communications Corp or generate 6.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBA Communications Corp vs. Bank of China
Performance |
| Timeline |
| SBA Communications Corp |
| Bank of China Limited |
SBA Communications and Bank of China Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBA Communications and Bank of China Limited
The main advantage of trading using opposite SBA Communications and Bank of China Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBA Communications position performs unexpectedly, Bank of China Limited 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 Bank of China Limited will offset losses from the drop in Bank of China Limited's long position.| SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc |
| Bank of China Limited vs. Superior Plus Corp | Bank of China Limited vs. NMI Holdings | Bank of China Limited vs. Origin Agritech | Bank of China Limited vs. SIVERS SEMICONDUCTORS AB |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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