Correlation Between Big 5 and Crown Castle

Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and Crown Castle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big 5 Sporting and Crown Castle International, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of Crown Castle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Crown Castle.

Diversification Opportunities for Big 5 and Crown Castle

0.6

Correlation Coefficient

Big 5  Crown Castle

Poor diversification

The 3 months correlation between Big and Crown is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Crown Castle International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Castle Interna and Big 5 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 Big 5 Sporting 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 Interna has no effect on the direction of Big 5 i.e., Big 5 and Crown Castle go up and down completely randomly.

Pair Corralation between Big 5 and Crown Castle

Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the Crown Castle. In addition to that, Big 5 is 3.66 times more volatile than Crown Castle International. It trades about -0.06 of its total potential returns per unit of risk. Crown Castle International is currently generating about 0.06 per unit of volatility. If you would invest  9,251  in Crown Castle International on September 3, 2024 and sell it today you would earn a total of  909.00  from holding Crown Castle International or generate 9.83% return on investment over 90 days.

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

Big 5 Sporting  vs.  Crown Castle International

Big 5 Sporting

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Big 5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Crown Castle Interna

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Castle International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Crown Castle is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Big 5 and Crown Castle

The main advantage of trading using opposite Big 5 and Crown Castle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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 Big 5 Sporting and Crown Castle International 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.