Correlation Between Simon Property and Federal Realty

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

Diversification Opportunities for Simon Property and Federal Realty

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Simon and Federal is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Federal Realty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Realty Investment 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 Federal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Realty Investment has no effect on the direction of Simon Property i.e., Simon Property and Federal Realty go up and down completely randomly.

Pair Corralation between Simon Property and Federal Realty

Considering the 90-day investment horizon Simon Property is expected to generate 1.4 times less return on investment than Federal Realty. In addition to that, Simon Property is 1.16 times more volatile than Federal Realty Investment. It trades about 0.15 of its total potential returns per unit of risk. Federal Realty Investment is currently generating about 0.24 per unit of volatility. If you would invest  10,108  in Federal Realty Investment on April 25, 2024 and sell it today you would earn a total of  617.00  from holding Federal Realty Investment or generate 6.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Simon Property Group  vs.  Federal Realty Investment

 Performance 
       Timeline  
Simon Property Group 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Simon Property may actually be approaching a critical reversion point that can send shares even higher in August 2024.
Federal Realty Investment 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Federal Realty Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Federal Realty is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Simon Property and Federal Realty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Simon Property and Federal Realty

The main advantage of trading using opposite Simon Property and Federal Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simon Property position performs unexpectedly, Federal 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 Federal Realty will offset losses from the drop in Federal Realty's long position.
The idea behind Simon Property Group and Federal Realty Investment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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