Correlation Between Crown Castle and American Tower

Can any of the company-specific risk be diversified away by investing in both Crown Castle and American Tower 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 Crown Castle and American Tower into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Crown Castle and American Tower Corp, you can compare the effects of market volatilities on Crown Castle and American Tower 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 Crown Castle with a short position of American Tower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Castle and American Tower.

Diversification Opportunities for Crown Castle and American Tower

0.95

Correlation Coefficient

Crown Castle  American Tower

Almost no diversification

The 3 months correlation between Crown and American is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Crown Castle and American Tower Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Tower Corp and Crown Castle 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 Crown Castle are associated (or correlated) with American Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Tower Corp has no effect on the direction of Crown Castle i.e., Crown Castle and American Tower go up and down completely randomly.

Pair Corralation between Crown Castle and American Tower

Considering the 90-day investment horizon Crown Castle is expected to generate 0.88 times more return on investment than American Tower. However, Crown Castle is 1.13 times less risky than American Tower. It trades about -0.05 of its potential returns per unit of risk. American Tower Corp is currently generating about -0.08 per unit of risk. If you would invest  11,186  in Crown Castle on August 31, 2024 and sell it today you would lose (516.00) from holding Crown Castle or give up 4.61% of portfolio value over 90 days.

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

Crown Castle  vs.  American Tower Corp

Crown Castle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Castle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Crown Castle is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Crown Castle and American Tower

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

The idea behind Crown Castle and American Tower 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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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.