Correlation Between Empire State and SBA Communications
Can any of the company-specific risk be diversified away by investing in both Empire State 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 Empire State and SBA Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Empire State Realty and SBA Communications Corp, you can compare the effects of market volatilities on Empire State 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 Empire State with a short position of SBA Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and SBA Communications.
Diversification Opportunities for Empire State and SBA Communications
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Empire and SBA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty 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 Empire State 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 Empire State Realty 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 Empire State i.e., Empire State and SBA Communications go up and down completely randomly.
Pair Corralation between Empire State and SBA Communications
Given the investment horizon of 90 days Empire State Realty is expected to under-perform the SBA Communications. But the stock apears to be less risky and, when comparing its historical volatility, Empire State Realty is 1.31 times less risky than SBA Communications. The stock trades about -0.13 of its potential returns per unit of risk. The SBA Communications Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 20,040 in SBA Communications Corp on November 2, 2024 and sell it today you would lose (126.00) from holding SBA Communications Corp or give up 0.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire State Realty vs. SBA Communications Corp
Performance |
| Timeline |
| Empire State Realty |
| SBA Communications Corp |
Empire State and SBA Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and SBA Communications
The main advantage of trading using opposite Empire State and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State 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.| Empire State vs. Empire State Realty | Empire State vs. City Office | Empire State vs. Cousins Properties Incorporated | Empire State vs. Postal Realty Trust |
| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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