Correlation Between Simon Property and BBB Foods

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

Diversification Opportunities for Simon Property and BBB Foods

0.65

Correlation Coefficient

Simon Property  BBB Foods

Poor diversification

The 3 months correlation between Simon and BBB is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Simon Property i.e., Simon Property and BBB Foods go up and down completely randomly.

Pair Corralation between Simon Property and BBB Foods

Considering the 90-day investment horizon Simon Property Group is expected to generate 0.35 times more return on investment than BBB Foods. However, Simon Property Group is 2.84 times less risky than BBB Foods. It trades about 0.17 of its potential returns per unit of risk. BBB Foods is currently generating about -0.05 per unit of risk. If you would invest  16,526  in Simon Property Group on August 30, 2024 and sell it today you would earn a total of  1,849  from holding Simon Property Group or generate 11.19% return on investment over 90 days.

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

Simon Property Group  vs.  BBB Foods

Simon Property Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Simon Property may actually be approaching a critical reversion point that can send shares even higher in December 2024.

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Simon Property and BBB Foods

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

The idea behind Simon Property Group and BBB Foods 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .