Correlation Between Realty Income and CTO Realty

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

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

Diversification Opportunities for Realty Income and CTO Realty

-0.54

Correlation Coefficient

Realty Income  CTO Realty

Excellent diversification

The 3 months correlation between Realty and CTO is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income 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 Realty Income 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 Realty Income 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 Realty Income i.e., Realty Income and CTO Realty go up and down completely randomly.

Pair Corralation between Realty Income and CTO Realty

Taking into account the 90-day investment horizon Realty Income is expected to under-perform the CTO Realty. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 1.97 times less risky than CTO Realty. The stock trades about -0.07 of its potential returns per unit of risk. The CTO Realty Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,864  in CTO Realty Growth on August 30, 2024 and sell it today you would earn a total of  180.00  from holding CTO Realty Growth or generate 9.66% return on investment over 90 days.

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

Realty Income  vs.  CTO Realty Growth

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Realty Income is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

CTO Realty Growth

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CTO Realty Growth are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, CTO Realty may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Realty Income and CTO Realty

The main advantage of trading using opposite Realty Income and CTO Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income 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 Realty Income 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.