Correlation Between Precinct Properties and CTO Realty

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

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

Diversification Opportunities for Precinct Properties and CTO Realty

0.46

Correlation Coefficient

Precinct Properties  CTO Realty

Very weak diversification

The 3 months correlation between Precinct and CTO is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Precinct Properties New 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 Precinct Properties 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 Precinct Properties New 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 Precinct Properties i.e., Precinct Properties and CTO Realty go up and down completely randomly.

Pair Corralation between Precinct Properties and CTO Realty

Assuming the 90 days horizon Precinct Properties New is expected to under-perform the CTO Realty. In addition to that, Precinct Properties is 1.44 times more volatile than CTO Realty Growth. It trades about -0.02 of its total potential returns per unit of risk. CTO Realty Growth is currently generating about 0.01 per unit of volatility. If you would invest  1,924  in CTO Realty Growth on December 28, 2024 and sell it today you would earn a total of  6.00  from holding CTO Realty Growth or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.89%
Values	Daily Returns

Precinct Properties New  vs.  CTO Realty Growth

Precinct Properties New

Risk-Adjusted Performance

Very Weak

Over the last 90 days Precinct Properties New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Precinct Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Precinct Properties and CTO Realty

The main advantage of trading using opposite Precinct Properties and CTO Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precinct Properties 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 Precinct Properties New 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..