Correlation Between Simon Property and Chongqing Rural

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

Diversification Opportunities for Simon Property and Chongqing Rural

0.4

Correlation Coefficient

Simon Property  Chongqing Rural

Very weak diversification

The 3 months correlation between Simon and Chongqing is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Chongqing Rural Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Rural Comm 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 Chongqing Rural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Rural Comm has no effect on the direction of Simon Property i.e., Simon Property and Chongqing Rural go up and down completely randomly.

Pair Corralation between Simon Property and Chongqing Rural

Assuming the 90 days trading horizon Simon Property is expected to generate 36.79 times less return on investment than Chongqing Rural. But when comparing it to its historical volatility, Simon Property Group is 2.73 times less risky than Chongqing Rural. It trades about 0.01 of its potential returns per unit of risk. Chongqing Rural Commercial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,592  in Chongqing Rural Commercial on December 22, 2024 and sell it today you would earn a total of  595.00  from holding Chongqing Rural Commercial or generate 22.96% return on investment over 90 days.

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

Simon Property Group  vs.  Chongqing Rural Commercial

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.

Chongqing Rural Comm

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Rural Commercial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Chongqing Rural showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simon Property and Chongqing Rural

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

The idea behind Simon Property Group and Chongqing Rural Commercial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.