Correlation Between Stepan and Simon Property

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

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

Diversification Opportunities for Stepan and Simon Property

0.19

Correlation Coefficient

Stepan  Simon Property

Average diversification

The 3 months correlation between Stepan and Simon is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company 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 Stepan 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 Stepan Company 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 Stepan i.e., Stepan and Simon Property go up and down completely randomly.

Pair Corralation between Stepan and Simon Property

Considering the 90-day investment horizon Stepan is expected to generate 82.42 times less return on investment than Simon Property. In addition to that, Stepan is 1.73 times more volatile than Simon Property Group. It trades about 0.0 of its total potential returns per unit of risk. Simon Property Group is currently generating about 0.15 per unit of volatility. If you would invest  16,302  in Simon Property Group on September 15, 2024 and sell it today you would earn a total of  1,658  from holding Simon Property Group or generate 10.17% return on investment over 90 days.

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

Stepan Company  vs.  Simon Property Group

Stepan Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Stepan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Simon Property Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 12 (%) 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 January 2025.

Pair Trading with Stepan and Simon Property

The main advantage of trading using opposite Stepan and Simon Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan 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 Stepan Company 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.