Correlation Between Empire State and Acadia Realty

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

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

Diversification Opportunities for Empire State and Acadia Realty

0.41

Correlation Coefficient

Empire State  Acadia Realty

Very weak diversification

The 3 months correlation between Empire and Acadia is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty 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 Empire State 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 Empire State Realty 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 Empire State i.e., Empire State and Acadia Realty go up and down completely randomly.

Pair Corralation between Empire State and Acadia Realty

Given the investment horizon of 90 days Empire State Realty is expected to under-perform the Acadia Realty. In addition to that, Empire State is 1.05 times more volatile than Acadia Realty Trust. It trades about -0.23 of its total potential returns per unit of risk. Acadia Realty Trust is currently generating about -0.12 per unit of volatility. If you would invest  2,380  in Acadia Realty Trust on December 28, 2024 and sell it today you would lose (277.00) from holding Acadia Realty Trust or give up 11.64% of portfolio value over 90 days.

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

Empire State Realty  vs.  Acadia Realty Trust

Empire State Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empire State Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 Empire State and Acadia Realty

The main advantage of trading using opposite Empire State and Acadia Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State 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 Empire State Realty 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 Transaction History module to view history of all your transactions and understand their impact on performance.