Correlation Between Bank of America and SBA Communications
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and SBA Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and SBA Communications Corp, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of SBA Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and SBA Communications.
Diversification Opportunities for Bank of America and SBA Communications
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and SBA is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America 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 Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and SBA Communications go up and down completely randomly.
Pair Corralation between Bank of America and SBA Communications
Considering the 90-day investment horizon Bank of America is expected to generate 1.11 times more return on investment than SBA Communications. However, Bank of America is 1.11 times more volatile than SBA Communications Corp. It trades about 0.29 of its potential returns per unit of risk. SBA Communications Corp is currently generating about 0.06 per unit of risk. If you would invest 4,231 in Bank of America on August 31, 2024 and sell it today you would earn a total of 546.00 from holding Bank of America or generate 12.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. SBA Communications Corp
Performance |
| Timeline |
| Bank of America |
| SBA Communications Corp |
Bank of America and SBA Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and SBA Communications
The main advantage of trading using opposite Bank of America and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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