Correlation Between Broadstone Net and CTO Realty

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

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

Diversification Opportunities for Broadstone Net and CTO Realty

-0.03

Correlation Coefficient

Broadstone Net  CTO Realty

Good diversification

The 3 months correlation between Broadstone and CTO is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Broadstone Net Lease 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 Broadstone Net 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 Broadstone Net Lease 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 Broadstone Net i.e., Broadstone Net and CTO Realty go up and down completely randomly.

Pair Corralation between Broadstone Net and CTO Realty

Considering the 90-day investment horizon Broadstone Net Lease is expected to generate 1.14 times more return on investment than CTO Realty. However, Broadstone Net is 1.14 times more volatile than CTO Realty Growth. It trades about -0.11 of its potential returns per unit of risk. CTO Realty Growth is currently generating about -0.13 per unit of risk. If you would invest  1,800  in Broadstone Net Lease on August 30, 2024 and sell it today you would lose (48.00) from holding Broadstone Net Lease or give up 2.67% of portfolio value over 90 days.

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

Broadstone Net Lease  vs.  CTO Realty Growth

Broadstone Net Lease

Risk-Adjusted Performance

0 of 100

Very Weak

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

CTO Realty Growth

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CTO Realty Growth are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CTO Realty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Broadstone Net and CTO Realty

The main advantage of trading using opposite Broadstone Net and CTO Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadstone Net 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 Broadstone Net Lease 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.