Correlation Between Major Drilling and Simon Property

Can any of the company-specific risk be diversified away by investing in both Major Drilling and Simon Property 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 Major Drilling and Simon Property into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Major Drilling Group and Simon Property Group, you can compare the effects of market volatilities on Major Drilling and Simon Property 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 Major Drilling with a short position of Simon Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Simon Property.

Diversification Opportunities for Major Drilling and Simon Property

0.43

Correlation Coefficient

Major Drilling  Simon Property

Very weak diversification

The 3 months correlation between Major and Simon is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Simon Property Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simon Property Group and Major Drilling 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 Major Drilling Group are associated (or correlated) with Simon Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simon Property Group has no effect on the direction of Major Drilling i.e., Major Drilling and Simon Property go up and down completely randomly.

Pair Corralation between Major Drilling and Simon Property

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the Simon Property. In addition to that, Major Drilling is 2.54 times more volatile than Simon Property Group. It trades about -0.05 of its total potential returns per unit of risk. Simon Property Group is currently generating about 0.24 per unit of volatility. If you would invest  14,595  in Simon Property Group on September 3, 2024 and sell it today you would earn a total of  2,785  from holding Simon Property Group or generate 19.08% return on investment over 90 days.

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

Major Drilling Group  vs.  Simon Property Group

Major Drilling Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Major Drilling Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Simon Property Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Simon Property reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Major Drilling and Simon Property

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

The idea behind Major Drilling Group and Simon Property 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.