Correlation Between Two Harbors and CROWN

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

By analyzing existing cross correlation between Two Harbors Investments and CROWN CASTLE INTL, you can compare the effects of market volatilities on Two Harbors and CROWN 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 Two Harbors with a short position of CROWN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and CROWN.

Diversification Opportunities for Two Harbors and CROWN

0.22

Correlation Coefficient

Two Harbors  CROWN

Modest diversification

The 3 months correlation between Two and CROWN is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investments and CROWN CASTLE INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CROWN CASTLE INTL and Two Harbors 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 Two Harbors Investments are associated (or correlated) with CROWN. 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 INTL has no effect on the direction of Two Harbors i.e., Two Harbors and CROWN go up and down completely randomly.

Pair Corralation between Two Harbors and CROWN

Assuming the 90 days trading horizon Two Harbors Investments is expected to generate about the same return on investment as CROWN CASTLE INTL. However, Two Harbors is 1.7 times more volatile than CROWN CASTLE INTL. It trades about 0.03 of its potential returns per unit of risk. CROWN CASTLE INTL is currently producing about 0.05 per unit of risk. If you would invest  9,607  in CROWN CASTLE INTL on December 24, 2024 and sell it today you would earn a total of  58.00  from holding CROWN CASTLE INTL or generate 0.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Two Harbors Investments  vs.  CROWN CASTLE INTL

Two Harbors Investments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Two Harbors Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Two Harbors is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

CROWN CASTLE INTL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CROWN CASTLE INTL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CROWN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Two Harbors and CROWN

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

The idea behind Two Harbors Investments and CROWN CASTLE INTL 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.