Correlation Between Equinix and Crown Castle

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

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

Diversification Opportunities for Equinix and Crown Castle

-0.66

Correlation Coefficient

Equinix  Crown Castle

Excellent diversification

The 3 months correlation between Equinix and Crown is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and Crown Castle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Castle and Equinix 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 Equinix 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 Equinix i.e., Equinix and Crown Castle go up and down completely randomly.

Pair Corralation between Equinix and Crown Castle

Given the investment horizon of 90 days Equinix is expected to under-perform the Crown Castle. But the stock apears to be less risky and, when comparing its historical volatility, Equinix is 1.07 times less risky than Crown Castle. The stock trades about -0.02 of its potential returns per unit of risk. The Crown Castle is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  8,786  in Crown Castle on February 3, 2025 and sell it today you would earn a total of  1,901  from holding Crown Castle or generate 21.64% return on investment over 90 days.

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

Equinix  vs.  Crown Castle

Equinix

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equinix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Equinix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Crown Castle

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Castle are ranked lower than 12 (%) 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 Equinix and Crown Castle

The main advantage of trading using opposite Equinix and Crown Castle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix 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 Equinix 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.