Correlation Between Crown Castle and Power REIT

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

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

Diversification Opportunities for Crown Castle and Power REIT

-0.43

Correlation Coefficient

Crown Castle  Power REIT

Very good diversification

The 3 months correlation between Crown and Power is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Crown Castle and Power REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power REIT 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 Power REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power REIT has no effect on the direction of Crown Castle i.e., Crown Castle and Power REIT go up and down completely randomly.

Pair Corralation between Crown Castle and Power REIT

Considering the 90-day investment horizon Crown Castle is expected to under-perform the Power REIT. But the stock apears to be less risky and, when comparing its historical volatility, Crown Castle is 20.83 times less risky than Power REIT. The stock trades about -0.51 of its potential returns per unit of risk. The Power REIT is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  105.00  in Power REIT on September 18, 2024 and sell it today you would earn a total of  20.00  from holding Power REIT or generate 19.05% return on investment over 90 days.

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

Crown Castle  vs.  Power REIT

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 weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Power REIT

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Power REIT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Power REIT showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crown Castle and Power REIT

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

The idea behind Crown Castle and Power REIT 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.