Correlation Between CTO Realty and Landsea Homes

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

Diversification Opportunities for CTO Realty and Landsea Homes

0.27

Correlation Coefficient

CTO Realty  Landsea Homes

Modest diversification

The 3 months correlation between CTO and Landsea is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding CTO Realty Growth and Landsea Homes Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landsea Homes Corp 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 Landsea Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landsea Homes Corp has no effect on the direction of CTO Realty i.e., CTO Realty and Landsea Homes go up and down completely randomly.

Pair Corralation between CTO Realty and Landsea Homes

Considering the 90-day investment horizon CTO Realty is expected to generate 3.95 times less return on investment than Landsea Homes. But when comparing it to its historical volatility, CTO Realty Growth is 2.88 times less risky than Landsea Homes. It trades about 0.04 of its potential returns per unit of risk. Landsea Homes Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  881.00  in Landsea Homes Corp on January 25, 2024 and sell it today you would earn a total of  253.00  from holding Landsea Homes Corp or generate 28.72% return on investment over 90 days.

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

CTO Realty Growth  vs.  Landsea Homes Corp

CTO Realty Growth

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CTO Realty Growth are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CTO Realty is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Landsea Homes Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Landsea Homes Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CTO Realty and Landsea Homes

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

The idea behind CTO Realty Growth and Landsea Homes Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.