Correlation Between Crown Castle and Invitation Homes

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

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

Diversification Opportunities for Crown Castle and Invitation Homes

0.66

Correlation Coefficient

Crown Castle  Invitation Homes

Poor diversification

The 3 months correlation between Crown and Invitation is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Crown Castle and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes 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 Invitation Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invitation Homes has no effect on the direction of Crown Castle i.e., Crown Castle and Invitation Homes go up and down completely randomly.

Pair Corralation between Crown Castle and Invitation Homes

Considering the 90-day investment horizon Crown Castle is expected to under-perform the Invitation Homes. In addition to that, Crown Castle is 1.15 times more volatile than Invitation Homes. It trades about -0.03 of its total potential returns per unit of risk. Invitation Homes is currently generating about 0.03 per unit of volatility. If you would invest  2,818  in Invitation Homes on September 19, 2024 and sell it today you would earn a total of  422.00  from holding Invitation Homes or generate 14.98% return on investment over 90 days.

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

Crown Castle  vs.  Invitation Homes

Crown Castle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Castle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Invitation Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invitation Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Crown Castle and Invitation Homes

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

The idea behind Crown Castle and Invitation Homes 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.