Correlation Between American Tower and PotlatchDeltic

Can any of the company-specific risk be diversified away by investing in both American Tower and PotlatchDeltic 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 PotlatchDeltic 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 PotlatchDeltic, you can compare the effects of market volatilities on American Tower and PotlatchDeltic 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 PotlatchDeltic. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Tower and PotlatchDeltic.

Diversification Opportunities for American Tower and PotlatchDeltic

0.08

Correlation Coefficient

American Tower  PotlatchDeltic

Significant diversification

The 3 months correlation between American and PotlatchDeltic is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding American Tower Corp and PotlatchDeltic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PotlatchDeltic 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 PotlatchDeltic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PotlatchDeltic has no effect on the direction of American Tower i.e., American Tower and PotlatchDeltic go up and down completely randomly.

Pair Corralation between American Tower and PotlatchDeltic

Assuming the 90 days horizon American Tower Corp is expected to under-perform the PotlatchDeltic. In addition to that, American Tower is 1.01 times more volatile than PotlatchDeltic. It trades about -0.4 of its total potential returns per unit of risk. PotlatchDeltic is currently generating about -0.26 per unit of volatility. If you would invest  4,134  in PotlatchDeltic on October 8, 2024 and sell it today you would lose (274.00) from holding PotlatchDeltic or give up 6.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

American Tower Corp  vs.  PotlatchDeltic

American Tower Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Tower Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PotlatchDeltic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PotlatchDeltic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PotlatchDeltic is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Tower and PotlatchDeltic

The main advantage of trading using opposite American Tower and PotlatchDeltic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Tower position performs unexpectedly, PotlatchDeltic 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 PotlatchDeltic will offset losses from the drop in PotlatchDeltic's long position.

The idea behind American Tower Corp and PotlatchDeltic 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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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.