Correlation Between National Storage and Simon Property

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

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

Diversification Opportunities for National Storage and Simon Property

0.42

Correlation Coefficient

National Storage  Simon Property

Very weak diversification

The 3 months correlation between National and Simon is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding National Storage REIT and Simon Property Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simon Property Group and National Storage 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 National Storage REIT are associated (or correlated) with Simon Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simon Property Group has no effect on the direction of National Storage i.e., National Storage and Simon Property go up and down completely randomly.

Pair Corralation between National Storage and Simon Property

Assuming the 90 days horizon National Storage REIT is expected to under-perform the Simon Property. In addition to that, National Storage is 1.19 times more volatile than Simon Property Group. It trades about -0.09 of its total potential returns per unit of risk. Simon Property Group is currently generating about 0.01 per unit of volatility. If you would invest  5,806  in Simon Property Group on December 21, 2024 and sell it today you would earn a total of  6.00  from holding Simon Property Group or generate 0.1% return on investment over 90 days.

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

National Storage REIT  vs.  Simon Property Group

National Storage REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Storage REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Simon Property Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simon Property Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady technical and fundamental indicators, Simon Property is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with National Storage and Simon Property

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

The idea behind National Storage REIT and Simon Property Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.