Correlation Between American Tower and SBA Communications
Can any of the company-specific risk be diversified away by investing in both American Tower and SBA Communications 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 American Tower and SBA Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Tower Corp and SBA Communications Corp, you can compare the effects of market volatilities on American Tower and SBA Communications 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 American Tower with a short position of SBA Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Tower and SBA Communications.
Diversification Opportunities for American Tower and SBA Communications
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and SBA is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding American Tower Corp and SBA Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBA Communications Corp and American Tower 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 American Tower Corp are associated (or correlated) with SBA Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBA Communications Corp has no effect on the direction of American Tower i.e., American Tower and SBA Communications go up and down completely randomly.
Pair Corralation between American Tower and SBA Communications
Considering the 90-day investment horizon American Tower Corp is expected to generate 1.51 times more return on investment than SBA Communications. However, American Tower is 1.51 times more volatile than SBA Communications Corp. It trades about -0.17 of its potential returns per unit of risk. SBA Communications Corp is currently generating about -0.27 per unit of risk. If you would invest 22,280 in American Tower Corp on August 26, 2024 and sell it today you would lose (1,849) from holding American Tower Corp or give up 8.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Tower Corp vs. SBA Communications Corp
Performance |
| Timeline |
| American Tower Corp |
| SBA Communications Corp |
American Tower and SBA Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Tower and SBA Communications
The main advantage of trading using opposite American Tower and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Tower position performs unexpectedly, SBA Communications 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 SBA Communications will offset losses from the drop in SBA Communications' long position.| American Tower vs. Digital Realty Trust | American Tower vs. Equinix | American Tower vs. SBA Communications Corp | American Tower vs. Iron Mountain Incorporated |
| SBA Communications vs. American Tower Corp | SBA Communications vs. Digital Realty Trust | SBA Communications vs. Equinix | SBA Communications vs. Iron Mountain Incorporated |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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