Correlation Between American Homes and Acadia Realty

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

By analyzing existing cross correlation between American Homes 4 and Acadia Realty Trust, you can compare the effects of market volatilities on American Homes 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 American Homes with a short position of Acadia Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Acadia Realty.

Diversification Opportunities for American Homes and Acadia Realty

-0.06

Correlation Coefficient

American Homes  Acadia Realty

Good diversification

The 3 months correlation between American and Acadia is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 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 American Homes 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 American Homes 4 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 American Homes i.e., American Homes and Acadia Realty go up and down completely randomly.

Pair Corralation between American Homes and Acadia Realty

Considering the 90-day investment horizon American Homes 4 is expected to generate 0.86 times more return on investment than Acadia Realty. However, American Homes 4 is 1.16 times less risky than Acadia Realty. It trades about 0.03 of its potential returns per unit of risk. Acadia Realty Trust is currently generating about -0.11 per unit of risk. If you would invest  3,672  in American Homes 4 on December 29, 2024 and sell it today you would earn a total of  76.00  from holding American Homes 4 or generate 2.07% return on investment over 90 days.

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

American Homes 4  vs.  Acadia Realty Trust

American Homes 4

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Homes 4 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, American Homes is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with American Homes and Acadia Realty

The main advantage of trading using opposite American Homes and Acadia Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes 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 American Homes 4 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.