Correlation Between Simon Property and Federal Realty

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

Diversification Opportunities for Simon Property and Federal Realty

0.52

Correlation Coefficient

Simon Property  Federal Realty

Very weak diversification

The 3 months correlation between Simon and Federal is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Federal Realty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Realty Investment 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 Federal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Realty Investment has no effect on the direction of Simon Property i.e., Simon Property and Federal Realty go up and down completely randomly.

Pair Corralation between Simon Property and Federal Realty

Considering the 90-day investment horizon Simon Property Group is expected to generate 0.97 times more return on investment than Federal Realty. However, Simon Property Group is 1.03 times less risky than Federal Realty. It trades about -0.01 of its potential returns per unit of risk. Federal Realty Investment is currently generating about -0.13 per unit of risk. If you would invest  16,877  in Simon Property Group on December 28, 2024 and sell it today you would lose (292.00) from holding Simon Property Group or give up 1.73% of portfolio value over 90 days.

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

Simon Property Group  vs.  Federal Realty Investment

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. Despite nearly stable basic indicators, Simon Property is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Federal Realty Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Realty Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Simon Property and Federal Realty

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

The idea behind Simon Property Group and Federal Realty Investment 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.