Correlation Between Realty Income and Acadia Realty

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

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

Diversification Opportunities for Realty Income and Acadia Realty

-0.6

Correlation Coefficient

Realty Income  Acadia Realty

Excellent diversification

The 3 months correlation between Realty and Acadia is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Acadia Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Realty Trust and Realty Income 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 Realty Income are associated (or correlated) with Acadia Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadia Realty Trust has no effect on the direction of Realty Income i.e., Realty Income and Acadia Realty go up and down completely randomly.

Pair Corralation between Realty Income and Acadia Realty

Taking into account the 90-day investment horizon Realty Income is expected to under-perform the Acadia Realty. In addition to that, Realty Income is 1.19 times more volatile than Acadia Realty Trust. It trades about -0.13 of its total potential returns per unit of risk. Acadia Realty Trust is currently generating about 0.29 per unit of volatility. If you would invest  2,459  in Acadia Realty Trust on August 31, 2024 and sell it today you would earn a total of  149.00  from holding Acadia Realty Trust or generate 6.06% return on investment over 90 days.

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

Realty Income  vs.  Acadia Realty Trust

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Realty Income is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Acadia Realty Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Acadia Realty Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain forward-looking signals, Acadia Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Realty Income and Acadia Realty

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

The idea behind Realty Income and Acadia Realty Trust 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 Transaction History module to view history of all your transactions and understand their impact on performance.