Correlation Between Simon Property and RF Acquisition

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

Diversification Opportunities for Simon Property and RF Acquisition

-0.43

Correlation Coefficient

Simon Property  RF Acquisition

Very good diversification

The 3 months correlation between Simon and RFACR is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and RF Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Acquisition Corp 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 RF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Acquisition Corp has no effect on the direction of Simon Property i.e., Simon Property and RF Acquisition go up and down completely randomly.

Pair Corralation between Simon Property and RF Acquisition

Assuming the 90 days trading horizon Simon Property Group is expected to under-perform the RF Acquisition. But the preferred stock apears to be less risky and, when comparing its historical volatility, Simon Property Group is 17.91 times less risky than RF Acquisition. The preferred stock trades about -0.01 of its potential returns per unit of risk. The RF Acquisition Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  13.00  in RF Acquisition Corp on December 19, 2024 and sell it today you would earn a total of  12.00  from holding RF Acquisition Corp or generate 92.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	58.33%
Values	Daily Returns

Simon Property Group  vs.  RF Acquisition Corp

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.

RF Acquisition Corp

Risk-Adjusted Performance

Good

Over the last 90 days RF Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively inconsistent fundamental indicators, RF Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simon Property and RF Acquisition

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

The idea behind Simon Property Group and RF Acquisition Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.