Correlation Between CTO Realty and City Office

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

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

Diversification Opportunities for CTO Realty and City Office

-0.74

Correlation Coefficient

CTO Realty  City Office

Pay attention - limited upside

The 3 months correlation between CTO and City is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding CTO Realty Growth and City Office REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Office REIT and CTO Realty 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 CTO Realty Growth are associated (or correlated) with City Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Office REIT has no effect on the direction of CTO Realty i.e., CTO Realty and City Office go up and down completely randomly.

Pair Corralation between CTO Realty and City Office

Assuming the 90 days trading horizon CTO Realty Growth is expected to generate 1.07 times more return on investment than City Office. However, CTO Realty is 1.07 times more volatile than City Office REIT. It trades about 0.04 of its potential returns per unit of risk. City Office REIT is currently generating about -0.35 per unit of risk. If you would invest  2,220  in CTO Realty Growth on October 26, 2024 and sell it today you would earn a total of  18.00  from holding CTO Realty Growth or generate 0.81% return on investment over 90 days.

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

CTO Realty Growth  vs.  City Office REIT

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.

City Office REIT

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in City Office REIT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, City Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CTO Realty and City Office

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

The idea behind CTO Realty Growth and City Office REIT 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.