Correlation Between W P and CTO Realty

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Can any of the company-specific risk be diversified away by investing in both W P 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 W P and CTO Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between W P Carey and CTO Realty Growth, you can compare the effects of market volatilities on W P 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 W P with a short position of CTO Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of W P and CTO Realty.

Diversification Opportunities for W P and CTO Realty

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between W P and CTO Realty is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding W P Carey 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 W P 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 W P Carey 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 W P i.e., W P and CTO Realty go up and down completely randomly.

Pair Corralation between W P and CTO Realty

Considering the 90-day investment horizon W P Carey is expected to generate 0.56 times more return on investment than CTO Realty. However, W P Carey is 1.77 times less risky than CTO Realty. It trades about 0.3 of its potential returns per unit of risk. CTO Realty Growth is currently generating about -0.06 per unit of risk. If you would invest  7,505  in W P Carey on September 4, 2022 and sell it today you would earn a total of  687.00  from holding W P Carey or generate 9.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

W P Carey  vs.  CTO Realty Growth

 Performance (%) 
       Timeline  
W P Carey 
W P Performance
0 of 100
Over the last 90 days W P Carey has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, W P is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

W P Price Channel

CTO Realty Growth 
CTO Realty Performance
0 of 100
Over the last 90 days CTO Realty Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, CTO Realty is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

CTO Realty Price Channel

W P and CTO Realty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with W P and CTO Realty

The main advantage of trading using opposite W P and CTO Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if W P 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.
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The idea behind W P Carey 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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Check out your portfolio center. 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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