Correlation Between Acadia Realty and Sotherly Hotels

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

Diversification Opportunities for Acadia Realty and Sotherly Hotels

-0.46

Correlation Coefficient

Acadia Realty  Sotherly Hotels

Very good diversification

The 3 months correlation between Acadia and Sotherly is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Realty Trust and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels 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 Sotherly Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotherly Hotels has no effect on the direction of Acadia Realty i.e., Acadia Realty and Sotherly Hotels go up and down completely randomly.

Pair Corralation between Acadia Realty and Sotherly Hotels

Considering the 90-day investment horizon Acadia Realty Trust is expected to generate 0.21 times more return on investment than Sotherly Hotels. However, Acadia Realty Trust is 4.73 times less risky than Sotherly Hotels. It trades about 0.14 of its potential returns per unit of risk. Sotherly Hotels is currently generating about -0.02 per unit of risk. If you would invest  2,270  in Acadia Realty Trust on September 12, 2024 and sell it today you would earn a total of  224.00  from holding Acadia Realty Trust or generate 9.87% return on investment over 90 days.

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

Acadia Realty Trust  vs.  Sotherly Hotels

Acadia Realty Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Acadia Realty Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain forward-looking signals, Acadia Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sotherly Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sotherly Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Acadia Realty and Sotherly Hotels

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

The idea behind Acadia Realty Trust and Sotherly Hotels 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.