Correlation Between Pure Cycle and Simon Property

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

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

Diversification Opportunities for Pure Cycle and Simon Property

0.88

Correlation Coefficient

Pure Cycle  Simon Property

Very poor diversification

The 3 months correlation between Pure and Simon is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Pure Cycle 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 Pure Cycle 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 Pure Cycle 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 Pure Cycle i.e., Pure Cycle and Simon Property go up and down completely randomly.

Pair Corralation between Pure Cycle and Simon Property

Given the investment horizon of 90 days Pure Cycle is expected to generate 2.61 times more return on investment than Simon Property. However, Pure Cycle is 2.61 times more volatile than Simon Property Group. It trades about 0.18 of its potential returns per unit of risk. Simon Property Group is currently generating about 0.09 per unit of risk. If you would invest  1,090  in Pure Cycle on September 16, 2024 and sell it today you would earn a total of  245.00  from holding Pure Cycle or generate 22.48% return on investment over 90 days.

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

Pure Cycle  vs.  Simon Property Group

Pure Cycle

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Cycle are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Pure Cycle displayed solid returns over the last few months and may actually be approaching a breakup point.

Simon Property Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Simon Property may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pure Cycle and Simon Property

The main advantage of trading using opposite Pure Cycle and Simon Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pure Cycle 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 Pure Cycle 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.