Correlation Between Crown Castle and EPR Properties

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

By analyzing existing cross correlation between Crown Castle and EPR Properties, you can compare the effects of market volatilities on Crown Castle and EPR Properties 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 EPR Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Castle and EPR Properties.

Diversification Opportunities for Crown Castle and EPR Properties

0.76

Correlation Coefficient

Crown Castle  EPR Properties

Poor diversification

The 3 months correlation between Crown and EPR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Crown Castle and EPR Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPR Properties 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 EPR Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPR Properties has no effect on the direction of Crown Castle i.e., Crown Castle and EPR Properties go up and down completely randomly.

Pair Corralation between Crown Castle and EPR Properties

Considering the 90-day investment horizon Crown Castle is expected to generate 1.69 times more return on investment than EPR Properties. However, Crown Castle is 1.69 times more volatile than EPR Properties. It trades about 0.12 of its potential returns per unit of risk. EPR Properties is currently generating about 0.05 per unit of risk. If you would invest  8,907  in Crown Castle on December 27, 2024 and sell it today you would earn a total of  1,352  from holding Crown Castle or generate 15.18% return on investment over 90 days.

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

Crown Castle  vs.  EPR Properties

Crown Castle

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Castle are ranked lower than 9 (%) 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.

EPR Properties

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Crown Castle and EPR Properties

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

The idea behind Crown Castle and EPR Properties 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.