Correlation Between Crown Castle and Amazon

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

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

Diversification Opportunities for Crown Castle and Amazon

-0.4

Correlation Coefficient

Crown Castle  Amazon

Very good diversification

The 3 months correlation between Crown and Amazon is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Crown Castle International and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 International are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Crown Castle i.e., Crown Castle and Amazon go up and down completely randomly.

Pair Corralation between Crown Castle and Amazon

Assuming the 90 days trading horizon Crown Castle International is expected to under-perform the Amazon. In addition to that, Crown Castle is 1.87 times more volatile than Amazon Inc. It trades about -0.04 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.27 per unit of volatility. If you would invest  5,220  in Amazon Inc on September 26, 2024 and sell it today you would earn a total of  1,760  from holding Amazon Inc or generate 33.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Crown Castle International  vs.  Amazon Inc

Crown Castle Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Castle International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Amazon Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amazon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crown Castle and Amazon

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

The idea behind Crown Castle International and Amazon Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.