Correlation Between Crown Castle and Equinix

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Can any of the company-specific risk be diversified away by investing in both Crown Castle and Equinix 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 Equinix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crown Castle and Equinix, you can compare the effects of market volatilities on Crown Castle and Equinix 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 Equinix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Castle and Equinix.

Diversification Opportunities for Crown Castle and Equinix

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Crown and Equinix is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Crown Castle and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Crown Castle i.e., Crown Castle and Equinix go up and down completely randomly.

Pair Corralation between Crown Castle and Equinix

Considering the 90-day investment horizon Crown Castle is expected to generate 0.7 times more return on investment than Equinix. However, Crown Castle is 1.42 times less risky than Equinix. It trades about 0.26 of its potential returns per unit of risk. Equinix is currently generating about 0.16 per unit of risk. If you would invest  15,499  in Crown Castle on May 17, 2022 and sell it today you would earn a total of  2,669  from holding Crown Castle or generate 17.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Crown Castle  vs.  Equinix

 Performance (%) 
       Timeline  
Crown Castle 
Crown Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Crown Castle are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Crown Castle is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Crown Price Channel

Equinix 
Equinix Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Equinix may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Equinix Price Channel

Crown Castle and Equinix Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Crown Castle and Equinix

The main advantage of trading using opposite Crown Castle and Equinix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crown Castle position performs unexpectedly, Equinix 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 Equinix will offset losses from the drop in Equinix's long position.
The idea behind Crown Castle and Equinix 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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