Correlation Between City Office and Acadia Realty

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

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

Diversification Opportunities for City Office and Acadia Realty

0.5

Correlation Coefficient

City Office  Acadia Realty

Very weak diversification

The 3 months correlation between City and Acadia is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding City Office 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 City Office 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 City Office 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 City Office i.e., City Office and Acadia Realty go up and down completely randomly.

Pair Corralation between City Office and Acadia Realty

Considering the 90-day investment horizon City Office is expected to under-perform the Acadia Realty. In addition to that, City Office is 1.37 times more volatile than Acadia Realty Trust. It trades about -0.15 of its total potential returns per unit of risk. Acadia Realty Trust is currently generating about 0.12 per unit of volatility. If you would invest  1,670  in Acadia Realty Trust on January 27, 2024 and sell it today you would earn a total of  68.00  from holding Acadia Realty Trust or generate 4.07% return on investment over 90 days.

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

City Office  vs.  Acadia Realty Trust

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 weak 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.

Acadia Realty Trust

Risk-Adjusted Performance

0 of 100

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

Pair Trading with City Office and Acadia Realty

The main advantage of trading using opposite City Office and Acadia Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Office 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 City Office 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.