Correlation Between Realty Income and Simon Property

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

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

Diversification Opportunities for Realty Income and Simon Property

-0.46

Correlation Coefficient

Realty Income  Simon Property

Very good diversification

The 3 months correlation between Realty and Simon is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income 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 Realty Income 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 Realty Income 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 Realty Income i.e., Realty Income and Simon Property go up and down completely randomly.

Pair Corralation between Realty Income and Simon Property

Assuming the 90 days horizon Realty Income is expected to under-perform the Simon Property. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 1.02 times less risky than Simon Property. The stock trades about -0.26 of its potential returns per unit of risk. The Simon Property Group is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  16,930  in Simon Property Group on September 22, 2024 and sell it today you would lose (750.00) from holding Simon Property Group or give up 4.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Realty Income  vs.  Simon Property Group

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic 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

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Simon Property may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Realty Income and Simon Property

The main advantage of trading using opposite Realty Income and Simon Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income 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 Realty Income 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.