Correlation Between Acadia Realty and City Office

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

Diversification Opportunities for Acadia Realty and City Office

0.56

Correlation Coefficient

Acadia Realty  City Office

Very weak diversification

The 3 months correlation between Acadia and City is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Realty Trust and City Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Office 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 City Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Office has no effect on the direction of Acadia Realty i.e., Acadia Realty and City Office go up and down completely randomly.

Pair Corralation between Acadia Realty and City Office

Considering the 90-day investment horizon Acadia Realty Trust is expected to generate 0.83 times more return on investment than City Office. However, Acadia Realty Trust is 1.21 times less risky than City Office. It trades about 0.23 of its potential returns per unit of risk. City Office is currently generating about -0.15 per unit of risk. If you would invest  1,598  in Acadia Realty Trust on January 26, 2024 and sell it today you would earn a total of  148.00  from holding Acadia Realty Trust or generate 9.26% return on investment over 90 days.

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

Acadia Realty Trust  vs.  City Office

Acadia Realty Trust

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acadia Realty Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Acadia Realty is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

City Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days City Office has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Acadia Realty and City Office

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

The idea behind Acadia Realty Trust and City Office 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.