Correlation Between Acadia Realty and EPR Properties

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Can any of the company-specific risk be diversified away by investing in both Acadia Realty and EPR Properties 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 Acadia Realty and EPR Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Acadia Realty Trust and EPR Properties, you can compare the effects of market volatilities on Acadia Realty and EPR Properties 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 Acadia Realty with a short position of EPR Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Realty and EPR Properties.

Diversification Opportunities for Acadia Realty and EPR Properties

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Acadia and EPR is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Realty Trust and EPR Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPR Properties and Acadia 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 Acadia Realty Trust are associated (or correlated) with EPR Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPR Properties has no effect on the direction of Acadia Realty i.e., Acadia Realty and EPR Properties go up and down completely randomly.

Pair Corralation between Acadia Realty and EPR Properties

Considering the 90-day investment horizon Acadia Realty is expected to generate 2.79 times less return on investment than EPR Properties. In addition to that, Acadia Realty is 1.58 times more volatile than EPR Properties. It trades about 0.02 of its total potential returns per unit of risk. EPR Properties is currently generating about 0.1 per unit of volatility. If you would invest  4,123  in EPR Properties on December 29, 2023 and sell it today you would earn a total of  95.00  from holding EPR Properties or generate 2.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Acadia Realty Trust  vs.  EPR Properties

 Performance 
       Timeline  
Acadia Realty Trust 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Acadia Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Acadia Realty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.
EPR Properties 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days EPR Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Acadia Realty and EPR Properties Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Acadia Realty and EPR Properties

The main advantage of trading using opposite Acadia Realty and EPR Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acadia Realty position performs unexpectedly, EPR Properties 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 EPR Properties will offset losses from the drop in EPR Properties' long position.
The idea behind Acadia Realty Trust and EPR Properties 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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