Correlation Between American Tower and CTO Realty

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

By analyzing existing cross correlation between American Tower Corp and CTO Realty Growth, you can compare the effects of market volatilities on American Tower and CTO Realty 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 American Tower with a short position of CTO Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Tower and CTO Realty.

Diversification Opportunities for American Tower and CTO Realty

0.26

Correlation Coefficient

American Tower  CTO Realty

Modest diversification

The 3 months correlation between American and CTO is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding American Tower Corp and CTO Realty Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTO Realty Growth and American Tower 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 American Tower Corp are associated (or correlated) with CTO Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTO Realty Growth has no effect on the direction of American Tower i.e., American Tower and CTO Realty go up and down completely randomly.

Pair Corralation between American Tower and CTO Realty

Considering the 90-day investment horizon American Tower Corp is expected to generate 1.3 times more return on investment than CTO Realty. However, American Tower is 1.3 times more volatile than CTO Realty Growth. It trades about -0.01 of its potential returns per unit of risk. CTO Realty Growth is currently generating about -0.06 per unit of risk. If you would invest  20,716  in American Tower Corp on November 28, 2024 and sell it today you would lose (341.00) from holding American Tower Corp or give up 1.65% of portfolio value over 90 days.

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

American Tower Corp  vs.  CTO Realty Growth

American Tower Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Tower Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, American Tower is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

CTO Realty Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days CTO Realty Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CTO Realty is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with American Tower and CTO Realty

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

The idea behind American Tower Corp and CTO Realty Growth 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.