Correlation Between BII Railway and SBA Communications
Can any of the company-specific risk be diversified away by investing in both BII Railway 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 BII Railway and SBA Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BII Railway Transportation and SBA Communications Corp, you can compare the effects of market volatilities on BII Railway 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 BII Railway with a short position of SBA Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and SBA Communications.
Diversification Opportunities for BII Railway and SBA Communications
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between BII and SBA is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation 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 BII Railway 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 BII Railway Transportation 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 BII Railway i.e., BII Railway and SBA Communications go up and down completely randomly.
Pair Corralation between BII Railway and SBA Communications
Assuming the 90 days horizon BII Railway Transportation is expected to generate 2.31 times more return on investment than SBA Communications. However, BII Railway is 2.31 times more volatile than SBA Communications Corp. It trades about 0.02 of its potential returns per unit of risk. SBA Communications Corp is currently generating about 0.01 per unit of risk. If you would invest 2.65 in BII Railway Transportation on December 13, 2024 and sell it today you would earn a total of 0.20 from holding BII Railway Transportation or generate 7.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BII Railway Transportation vs. SBA Communications Corp
Performance |
| Timeline |
| BII Railway Transpor |
| SBA Communications Corp |
BII Railway and SBA Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BII Railway and SBA Communications
The main advantage of trading using opposite BII Railway and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway 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.| BII Railway vs. Accenture plc | ||
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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