Correlation Between Simon Property and Auto Trader

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

Diversification Opportunities for Simon Property and Auto Trader

-0.5

Correlation Coefficient

Simon Property  Auto Trader

Very good diversification

The 3 months correlation between Simon and Auto is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group 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 Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Simon Property i.e., Simon Property and Auto Trader go up and down completely randomly.

Pair Corralation between Simon Property and Auto Trader

Assuming the 90 days horizon Simon Property Group is expected to generate 0.77 times more return on investment than Auto Trader. However, Simon Property Group is 1.29 times less risky than Auto Trader. It trades about 0.24 of its potential returns per unit of risk. Auto Trader Group is currently generating about 0.0 per unit of risk. If you would invest  14,541  in Simon Property Group on September 4, 2024 and sell it today you would earn a total of  2,839  from holding Simon Property Group or generate 19.52% return on investment over 90 days.

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

Simon Property Group  vs.  Auto Trader Group

Simon Property Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Simon Property reported solid returns over the last few months and may actually be approaching a breakup point.

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Auto Trader is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Simon Property and Auto Trader

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

The idea behind Simon Property Group and Auto Trader Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.