Correlation Between Simon Property and Acadia Realty

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

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

Diversification Opportunities for Simon Property and Acadia Realty

0.93

Correlation Coefficient

Simon Property  Acadia Realty

Almost no diversification

The 3 months correlation between Simon and Acadia is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group 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 Simon Property 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 Simon Property Group 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 Simon Property i.e., Simon Property and Acadia Realty go up and down completely randomly.

Pair Corralation between Simon Property and Acadia Realty

Considering the 90-day investment horizon Simon Property is expected to generate 1.15 times less return on investment than Acadia Realty. But when comparing it to its historical volatility, Simon Property Group is 1.12 times less risky than Acadia Realty. It trades about 0.21 of its potential returns per unit of risk. Acadia Realty Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,237  in Acadia Realty Trust on September 3, 2024 and sell it today you would earn a total of  348.00  from holding Acadia Realty Trust or generate 15.56% return on investment over 90 days.

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

Simon Property Group  vs.  Acadia Realty Trust

Simon Property Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Simon Property reported solid returns over the last few months and may actually be approaching a breakup point.

Acadia Realty Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Acadia Realty Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward-looking signals, Acadia Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simon Property and Acadia Realty

The main advantage of trading using opposite Simon Property and Acadia Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simon Property 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 Simon Property Group 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.