Correlation Between Acadia Realty and American Homes

Can any of the company-specific risk be diversified away by investing in both Acadia Realty and American Homes 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 American Homes 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 American Homes 4, you can compare the effects of market volatilities on Acadia Realty and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acadia Realty and American Homes.

Diversification Opportunities for Acadia Realty and American Homes

-0.34

Correlation Coefficient

Acadia Realty  American Homes

Very good diversification

The 3 months correlation between Acadia and American is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Realty Trust and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Acadia Realty i.e., Acadia Realty and American Homes go up and down completely randomly.

Pair Corralation between Acadia Realty and American Homes

Considering the 90-day investment horizon Acadia Realty Trust is expected to generate 1.04 times more return on investment than American Homes. However, Acadia Realty is 1.04 times more volatile than American Homes 4. It trades about 0.22 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.01 per unit of risk. If you would invest  1,730  in Acadia Realty Trust on September 22, 2024 and sell it today you would earn a total of  659.00  from holding Acadia Realty Trust or generate 38.09% return on investment over 90 days.

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

Acadia Realty Trust  vs.  American Homes 4

Acadia Realty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Acadia Realty Trust are ranked lower than 5 (%) 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 newest stock price agitation, may contribute to short-term losses for the retail investors.

American Homes 4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Homes 4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Acadia Realty and American Homes

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

The idea behind Acadia Realty Trust and American Homes 4 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.