Correlation Between Simon Property and Tenaris SA

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

Diversification Opportunities for Simon Property and Tenaris SA

0.75

Correlation Coefficient

Simon Property  Tenaris SA

Poor diversification

The 3 months correlation between Simon and Tenaris is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Tenaris SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA ADR 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 Tenaris SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenaris SA ADR has no effect on the direction of Simon Property i.e., Simon Property and Tenaris SA go up and down completely randomly.

Pair Corralation between Simon Property and Tenaris SA

Considering the 90-day investment horizon Simon Property Group is expected to generate 1.06 times more return on investment than Tenaris SA. However, Simon Property is 1.06 times more volatile than Tenaris SA ADR. It trades about -0.06 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about -0.11 per unit of risk. If you would invest  17,980  in Simon Property Group on October 6, 2024 and sell it today you would lose (373.00) from holding Simon Property Group or give up 2.07% 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.  Tenaris SA ADR

Simon Property Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 6 (%) 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 February 2025.

Tenaris SA ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Tenaris SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simon Property and Tenaris SA

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

The idea behind Simon Property Group and Tenaris SA ADR 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 Transaction History module to view history of all your transactions and understand their impact on performance.