Correlation Between Acadia Realty and Kite Realty

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

Diversification Opportunities for Acadia Realty and Kite Realty

0.72

Correlation Coefficient

Acadia Realty  Kite Realty

Poor diversification

The 3 months correlation between Acadia and Kite is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Realty Trust and Kite Realty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kite Realty Group 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 Kite Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kite Realty Group has no effect on the direction of Acadia Realty i.e., Acadia Realty and Kite Realty go up and down completely randomly.

Pair Corralation between Acadia Realty and Kite Realty

Considering the 90-day investment horizon Acadia Realty Trust is expected to under-perform the Kite Realty. But the stock apears to be less risky and, when comparing its historical volatility, Acadia Realty Trust is 1.01 times less risky than Kite Realty. The stock trades about -0.11 of its potential returns per unit of risk. The Kite Realty Group is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,475  in Kite Realty Group on December 27, 2024 and sell it today you would lose (216.00) from holding Kite Realty Group or give up 8.73% of portfolio value over 90 days.

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

Acadia Realty Trust  vs.  Kite Realty Group

Acadia Realty Trust

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Kite Realty Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kite Realty Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Acadia Realty and Kite Realty

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

The idea behind Acadia Realty Trust and Kite Realty Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.