Correlation Between Simon Property and National Retail
Can any of the company-specific risk be diversified away by investing in both Simon Property and National Retail 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 National Retail 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 National Retail Properties, you can compare the effects of market volatilities on Simon Property and National Retail 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 National Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simon Property and National Retail.
Diversification Opportunities for Simon Property and National Retail
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Simon and National is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and National Retail Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Retail Prop 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 National Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Retail Prop has no effect on the direction of Simon Property i.e., Simon Property and National Retail go up and down completely randomly.
Pair Corralation between Simon Property and National Retail
Considering the 90-day investment horizon Simon Property Group is expected to generate 1.34 times more return on investment than National Retail. However, Simon Property is 1.34 times more volatile than National Retail Properties. It trades about 0.07 of its potential returns per unit of risk. National Retail Properties is currently generating about 0.02 per unit of risk. If you would invest 9,639 in Simon Property Group on January 19, 2024 and sell it today you would earn a total of 4,492 from holding Simon Property Group or generate 46.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Simon Property Group vs. National Retail Properties
Performance |
| Timeline |
| Simon Property Group |
| National Retail Prop |
Simon Property and National Retail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Simon Property and National Retail
The main advantage of trading using opposite Simon Property and National Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simon Property position performs unexpectedly, National Retail 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 National Retail will offset losses from the drop in National Retail's long position.The idea behind Simon Property Group and National Retail Properties 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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