Correlation Between Alexandria Real and CTO Realty

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

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

Diversification Opportunities for Alexandria Real and CTO Realty

-0.02

Correlation Coefficient

Alexandria Real  CTO Realty

Good diversification

The 3 months correlation between Alexandria and CTO is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Alexandria Real Estate 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 Alexandria Real 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 Alexandria Real Estate 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 Alexandria Real i.e., Alexandria Real and CTO Realty go up and down completely randomly.

Pair Corralation between Alexandria Real and CTO Realty

Considering the 90-day investment horizon Alexandria Real Estate is expected to under-perform the CTO Realty. In addition to that, Alexandria Real is 1.12 times more volatile than CTO Realty Growth. It trades about -0.07 of its total potential returns per unit of risk. CTO Realty Growth is currently generating about -0.06 per unit of volatility. If you would invest  2,003  in CTO Realty Growth on November 28, 2024 and sell it today you would lose (111.00) from holding CTO Realty Growth or give up 5.54% of portfolio value over 90 days.

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

Alexandria Real Estate  vs.  CTO Realty Growth

Alexandria Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alexandria Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 Alexandria Real and CTO Realty

The main advantage of trading using opposite Alexandria Real and CTO Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alexandria Real 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 Alexandria Real Estate 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.