Correlation Between Acadia Realty and Amazon

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

Diversification Opportunities for Acadia Realty and Amazon

0.79

Correlation Coefficient

Acadia Realty  Amazon

Poor diversification

The 3 months correlation between Acadia and Amazon is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Realty Trust and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Acadia Realty i.e., Acadia Realty and Amazon go up and down completely randomly.

Pair Corralation between Acadia Realty and Amazon

Assuming the 90 days horizon Acadia Realty Trust is expected to under-perform the Amazon. But the stock apears to be less risky and, when comparing its historical volatility, Acadia Realty Trust is 1.05 times less risky than Amazon. The stock trades about -0.22 of its potential returns per unit of risk. The Amazon Inc is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  19,690  in Amazon Inc on September 27, 2024 and sell it today you would earn a total of  2,005  from holding Amazon Inc or generate 10.18% return on investment over 90 days.

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

Acadia Realty Trust  vs.  Amazon Inc

Acadia Realty Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Acadia Realty Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Acadia Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amazon Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Amazon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acadia Realty and Amazon

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

The idea behind Acadia Realty Trust and Amazon Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.