How Correlated Are Tower Stocks And Telecoms?

Start generating passive income through real estate.

Own a piece of your favorite cities through diversified real estate investments in the country's top markets

*Terms and conditions apply. Visit Nada's website for more details.

Clearly, the business of cell tower REITs like American Tower Corp AMT and Crown Castle International Corp CCI is closely tied to telecom companies like AT&T Inc. T and Verizon Communications Inc. VZ, so it stands to reason that the stocks must also tend to trade in similar directions. Right?

So far in 2016, that idea has not proven true. Verizon and AT&T have become top gainers so far this year, surging more than 12 percent in the first two months of the year and leaving Crown Castle (+2.0 percent) and American Tower (-4.9 percent) in the dust.

Related Link: A 'Growth Scare' Is Moving Markets Down, Not Political Uncertainty

According to data from Portfolio Visualizer, both American Tower and Crown Castle have between 41 and 43 percent correlation to both Verizon and AT&T during the past five years. Although that correlation is relatively strong, it appears to have broken down a bit so far in 2016.

Correlation Is Stronger To REIT Kin Vs. Telecom Cousins

American Tower and Crown Castle, have an even stronger correlation to their REIT cousins than to the big telecoms, which could go a long way in explaining why the two REITs have lagged AT&T and Verizon this year.

In the past five years, American Tower and Crown Castle have 65 percent and 56 percent correlations to the iShares Dow Jones US Real Estate (ETF) IYR. So far this year, the IYR is down 1.4 percent.

Disclosure: The author holds no position in the stocks mentioned.

Image Credit: Public Domain
Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: Analyst ColorREITEducationTop StoriesMarketsTechTrading IdeasGeneralReal Estatecell tower REITscell towersPortfolio Visualizertelecomtelecommunication
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!