Correlation Between Simon Property and Range Resources

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

Diversification Opportunities for Simon Property and Range Resources

0.75

Correlation Coefficient

Simon Property  Range Resources

Poor diversification

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

Pair Corralation between Simon Property and Range Resources

Assuming the 90 days horizon Simon Property Group is expected to under-perform the Range Resources. In addition to that, Simon Property is 1.28 times more volatile than Range Resources Corp. It trades about -0.03 of its total potential returns per unit of risk. Range Resources Corp is currently generating about -0.03 per unit of volatility. If you would invest  6,933  in Range Resources Corp on December 29, 2024 and sell it today you would lose (233.00) from holding Range Resources Corp or give up 3.36% 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.  Range Resources Corp

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Range Resources Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Range Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Range Resources is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Simon Property and Range Resources

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

The idea behind Simon Property Group and Range Resources Corp 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 .