Correlation Between Elme Communities and Acadia Realty

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

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

Diversification Opportunities for Elme Communities and Acadia Realty

-0.48

Correlation Coefficient

Elme Communities  Acadia Realty

Very good diversification

The 3 months correlation between Elme and Acadia is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Elme Communities 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 Elme Communities 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 Elme Communities 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 Elme Communities i.e., Elme Communities and Acadia Realty go up and down completely randomly.

Pair Corralation between Elme Communities and Acadia Realty

Given the investment horizon of 90 days Elme Communities is expected to generate 1.16 times more return on investment than Acadia Realty. However, Elme Communities is 1.16 times more volatile than Acadia Realty Trust. It trades about 0.15 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  1,475  in Elme Communities on December 28, 2024 and sell it today you would earn a total of  252.00  from holding Elme Communities or generate 17.08% return on investment over 90 days.

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

Elme Communities  vs.  Acadia Realty Trust

Elme Communities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elme Communities are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Elme Communities exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Elme Communities and Acadia Realty

The main advantage of trading using opposite Elme Communities and Acadia Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elme Communities 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 Elme Communities 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.