Correlation Between American Healthcare and Crown Castle

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

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

Diversification Opportunities for American Healthcare and Crown Castle

0.69

Correlation Coefficient

American Healthcare  Crown Castle

Poor diversification

The 3 months correlation between American and Crown is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding American Healthcare REIT, and Crown Castle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Castle and American Healthcare 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 American Healthcare REIT, are associated (or correlated) with Crown Castle. 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 has no effect on the direction of American Healthcare i.e., American Healthcare and Crown Castle go up and down completely randomly.

Pair Corralation between American Healthcare and Crown Castle

Considering the 90-day investment horizon American Healthcare is expected to generate 10.39 times less return on investment than Crown Castle. But when comparing it to its historical volatility, American Healthcare REIT, is 1.11 times less risky than Crown Castle. It trades about 0.01 of its potential returns per unit of risk. Crown Castle is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,294  in Crown Castle on January 9, 2025 and sell it today you would earn a total of  1,189  from holding Crown Castle or generate 14.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

American Healthcare REIT,  vs.  Crown Castle

American Healthcare REIT,

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Healthcare REIT, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, American Healthcare is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Crown Castle

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Castle are ranked lower than 8 (%) 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.

Pair Trading with American Healthcare and Crown Castle

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

The idea behind American Healthcare REIT, and Crown Castle 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 CEOs Directory module to screen CEOs from public companies around the world.