Correlation Between Landsea Homes and CTO Realty

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

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

Diversification Opportunities for Landsea Homes and CTO Realty

0.33

Correlation Coefficient

Landsea Homes  CTO Realty

Weak diversification

The 3 months correlation between Landsea and CTO is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Landsea Homes Corp 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 Landsea Homes 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 Landsea Homes Corp 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 Landsea Homes i.e., Landsea Homes and CTO Realty go up and down completely randomly.

Pair Corralation between Landsea Homes and CTO Realty

Given the investment horizon of 90 days Landsea Homes Corp is expected to under-perform the CTO Realty. In addition to that, Landsea Homes is 3.03 times more volatile than CTO Realty Growth. It trades about -0.35 of its total potential returns per unit of risk. CTO Realty Growth is currently generating about 0.17 per unit of volatility. If you would invest  1,667  in CTO Realty Growth on January 25, 2024 and sell it today you would earn a total of  53.00  from holding CTO Realty Growth or generate 3.18% return on investment over 90 days.

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

Landsea Homes Corp  vs.  CTO Realty Growth

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 weak 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.

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 newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Landsea Homes and CTO Realty

The main advantage of trading using opposite Landsea Homes and CTO Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Landsea Homes 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 Landsea Homes Corp 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.

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 the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.