Correlation Between Simon Property and MEDIFAST INC

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

Diversification Opportunities for Simon Property and MEDIFAST INC

0.31

Correlation Coefficient

Simon Property  MEDIFAST INC

Weak diversification

The 3 months correlation between Simon and MEDIFAST is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and MEDIFAST INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDIFAST INC 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 MEDIFAST INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDIFAST INC has no effect on the direction of Simon Property i.e., Simon Property and MEDIFAST INC go up and down completely randomly.

Pair Corralation between Simon Property and MEDIFAST INC

Assuming the 90 days trading horizon Simon Property Group is expected to generate 0.33 times more return on investment than MEDIFAST INC. However, Simon Property Group is 3.02 times less risky than MEDIFAST INC. It trades about -0.05 of its potential returns per unit of risk. MEDIFAST INC is currently generating about -0.04 per unit of risk. If you would invest  6,093  in Simon Property Group on October 10, 2024 and sell it today you would lose (212.00) from holding Simon Property Group or give up 3.48% of portfolio value over 90 days.

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

Simon Property Group  vs.  MEDIFAST INC

Simon Property Group

Risk-Adjusted Performance

0 of 100

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.

MEDIFAST INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MEDIFAST INC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Simon Property and MEDIFAST INC

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

The idea behind Simon Property Group and MEDIFAST INC 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.