Correlation Between American Tower and Crown Castle

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

Diversification Opportunities for American Tower and Crown Castle

0.89

Correlation Coefficient

American Tower  Crown Castle

Very poor diversification

The 3 months correlation between American and Crown is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Tower Corp and Crown Castle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Castle 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 Crown Castle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Castle has no effect on the direction of American Tower i.e., American Tower and Crown Castle go up and down completely randomly.

Pair Corralation between American Tower and Crown Castle

Considering the 90-day investment horizon American Tower Corp is expected to generate 0.8 times more return on investment than Crown Castle. However, American Tower Corp is 1.24 times less risky than Crown Castle. It trades about 0.17 of its potential returns per unit of risk. Crown Castle is currently generating about 0.13 per unit of risk. If you would invest  18,192  in American Tower Corp on December 28, 2024 and sell it today you would earn a total of  3,364  from holding American Tower Corp or generate 18.49% return on investment over 90 days.

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

American Tower Corp  vs.  Crown Castle

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 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, American Tower unveiled solid returns over the last few months and may actually be approaching a breakup point.

Crown Castle

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Castle are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Crown Castle demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Tower and Crown Castle

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

The idea behind American Tower Corp and Crown Castle 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.