Correlation Between City Developments and CTO Realty

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Can any of the company-specific risk be diversified away by investing in both City Developments 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 Developments 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 Developments Limited and CTO Realty Growth, you can compare the effects of market volatilities on City Developments 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 Developments with a short position of CTO Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Developments and CTO Realty.

Diversification Opportunities for City Developments and CTO Realty

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between City and CTO is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding City Developments Limited 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 Developments 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 Developments Limited 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 Developments i.e., City Developments and CTO Realty go up and down completely randomly.

Pair Corralation between City Developments and CTO Realty

Assuming the 90 days horizon City Developments is expected to generate 3.08 times less return on investment than CTO Realty. But when comparing it to its historical volatility, City Developments Limited is 7.09 times less risky than CTO Realty. It trades about 0.21 of its potential returns per unit of risk. CTO Realty Growth is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,671  in CTO Realty Growth on December 29, 2023 and sell it today you would earn a total of  24.00  from holding CTO Realty Growth or generate 1.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

City Developments Limited  vs.  CTO Realty Growth

 Performance 
       Timeline  
City Developments 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days City Developments Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
CTO Realty Growth 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 latest stock price disarray, may contribute to short-term losses for the investors.

City Developments and CTO Realty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with City Developments and CTO Realty

The main advantage of trading using opposite City Developments and CTO Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Developments 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 Developments Limited 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 Stocks Directory module to find actively traded stocks across global markets.

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