Correlation Between City Office and CTO Realty

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

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

Diversification Opportunities for City Office and CTO Realty

-0.8

Correlation Coefficient

City Office  CTO Realty

Pay attention - limited upside

The 3 months correlation between City and CTO is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding City Office REIT 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 City Office 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 City Office REIT 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 City Office i.e., City Office and CTO Realty go up and down completely randomly.

Pair Corralation between City Office and CTO Realty

Assuming the 90 days trading horizon City Office REIT is expected to generate 1.06 times more return on investment than CTO Realty. However, City Office is 1.06 times more volatile than CTO Realty Growth. It trades about 0.1 of its potential returns per unit of risk. CTO Realty Growth is currently generating about 0.08 per unit of risk. If you would invest  1,762  in City Office REIT on October 10, 2024 and sell it today you would earn a total of  292.00  from holding City Office REIT or generate 16.57% return on investment over 90 days.

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

City Office REIT  vs.  CTO Realty Growth

City Office REIT

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in City Office REIT are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, City Office may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CTO Realty Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTO Realty Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with City Office and CTO Realty

The main advantage of trading using opposite City Office and CTO Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Office 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 City Office REIT 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..