Correlation Between American Tower and Weyerhaeuser

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

Diversification Opportunities for American Tower and Weyerhaeuser

0.14

Correlation Coefficient

American Tower  Weyerhaeuser

Average diversification

The 3 months correlation between American and Weyerhaeuser is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding American Tower Corp and Weyerhaeuser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyerhaeuser 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 Weyerhaeuser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyerhaeuser has no effect on the direction of American Tower i.e., American Tower and Weyerhaeuser go up and down completely randomly.

Pair Corralation between American Tower and Weyerhaeuser

Assuming the 90 days horizon American Tower Corp is expected to generate 1.14 times more return on investment than Weyerhaeuser. However, American Tower is 1.14 times more volatile than Weyerhaeuser. It trades about 0.15 of its potential returns per unit of risk. Weyerhaeuser is currently generating about 0.03 per unit of risk. If you would invest  17,482  in American Tower Corp on December 25, 2024 and sell it today you would earn a total of  2,528  from holding American Tower Corp or generate 14.46% return on investment over 90 days.

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

American Tower Corp  vs.  Weyerhaeuser

American Tower Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Tower Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, American Tower reported solid returns over the last few months and may actually be approaching a breakup point.

Weyerhaeuser

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Weyerhaeuser are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Weyerhaeuser is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Tower and Weyerhaeuser

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

The idea behind American Tower Corp and Weyerhaeuser 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.