Correlation Between CTO Realty and Precinct Properties

Can any of the company-specific risk be diversified away by investing in both CTO Realty and Precinct Properties 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 Precinct Properties 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 Precinct Properties New, you can compare the effects of market volatilities on CTO Realty and Precinct Properties 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 Precinct Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTO Realty and Precinct Properties.

Diversification Opportunities for CTO Realty and Precinct Properties

0.05

Correlation Coefficient

CTO Realty  Precinct Properties

Significant diversification

The 3 months correlation between CTO and Precinct is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding CTO Realty Growth and Precinct Properties New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precinct Properties New 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 Precinct Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precinct Properties New has no effect on the direction of CTO Realty i.e., CTO Realty and Precinct Properties go up and down completely randomly.

Pair Corralation between CTO Realty and Precinct Properties

Considering the 90-day investment horizon CTO Realty Growth is expected to under-perform the Precinct Properties. But the stock apears to be less risky and, when comparing its historical volatility, CTO Realty Growth is 2.07 times less risky than Precinct Properties. The stock trades about -0.12 of its potential returns per unit of risk. The Precinct Properties New is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  67.00  in Precinct Properties New on November 28, 2024 and sell it today you would lose (1.00) from holding Precinct Properties New or give up 1.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

CTO Realty Growth  vs.  Precinct Properties New

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.

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.

Pair Trading with CTO Realty and Precinct Properties

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

The idea behind CTO Realty Growth and Precinct Properties New 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.