Correlation Between Simon Property and Insteel Industries

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

Diversification Opportunities for Simon Property and Insteel Industries

0.36

Correlation Coefficient

Simon Property  Insteel Industries

Weak diversification

The 3 months correlation between Simon and Insteel is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries 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 Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of Simon Property i.e., Simon Property and Insteel Industries go up and down completely randomly.

Pair Corralation between Simon Property and Insteel Industries

Considering the 90-day investment horizon Simon Property Group is expected to generate 0.6 times more return on investment than Insteel Industries. However, Simon Property Group is 1.68 times less risky than Insteel Industries. It trades about 0.05 of its potential returns per unit of risk. Insteel Industries is currently generating about -0.06 per unit of risk. If you would invest  16,643  in Simon Property Group on October 3, 2024 and sell it today you would earn a total of  578.00  from holding Simon Property Group or generate 3.47% return on investment over 90 days.

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

Simon Property Group  vs.  Insteel Industries

Simon Property Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Insteel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insteel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Simon Property and Insteel Industries

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

The idea behind Simon Property Group and Insteel Industries 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.