Correlation Between Simon Property and Innovative Industrial

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

Diversification Opportunities for Simon Property and Innovative Industrial

0.69

Correlation Coefficient

Simon Property  Innovative Industrial

Poor diversification

The 3 months correlation between Simon and Innovative is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Innovative Industrial Properti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Industrial 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 Innovative Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Industrial has no effect on the direction of Simon Property i.e., Simon Property and Innovative Industrial go up and down completely randomly.

Pair Corralation between Simon Property and Innovative Industrial

Considering the 90-day investment horizon Simon Property Group is expected to under-perform the Innovative Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Simon Property Group is 1.59 times less risky than Innovative Industrial. The stock trades about -0.02 of its potential returns per unit of risk. The Innovative Industrial Properties is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6,541  in Innovative Industrial Properties on December 29, 2024 and sell it today you would lose (166.00) from holding Innovative Industrial Properties or give up 2.54% of portfolio value over 90 days.

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

Simon Property Group  vs.  Innovative Industrial Properti

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.

Innovative Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovative Industrial Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Innovative Industrial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Simon Property and Innovative Industrial

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

The idea behind Simon Property Group and Innovative Industrial Properties 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.