Correlation Between ATT and SBA Communications

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Can any of the company-specific risk be diversified away by investing in both ATT 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 ATT and SBA Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and SBA Communications Corp, you can compare the effects of market volatilities on ATT 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 ATT with a short position of SBA Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and SBA Communications.

Diversification Opportunities for ATT and SBA Communications

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between ATT and SBA Communications is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc 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 ATT 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 ATT Inc 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 ATT i.e., ATT and SBA Communications go up and down completely randomly.

Pair Corralation between ATT and SBA Communications

Taking into account the 90-day investment horizon ATT is expected to generate 1.89 times less return on investment than SBA Communications. But when comparing it to its historical volatility, ATT Inc is 1.16 times less risky than SBA Communications. It trades about 0.02 of its potential returns per unit of risk. SBA Communications Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  25,522  in SBA Communications Corp on November 5, 2022 and sell it today you would earn a total of  5,287  from holding SBA Communications Corp or generate 20.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ATT Inc  vs.  SBA Communications Corp

 Performance (%) 
       Timeline  
ATT Inc 
ATT Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

ATT Price Channel

SBA Communications Corp 
SBA Communications Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SBA Communications Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SBA Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

SBA Communications Price Channel

ATT and SBA Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and SBA Communications

The main advantage of trading using opposite ATT and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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.
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The idea behind ATT Inc and SBA Communications Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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