Correlation Between Simon Property and Smart REIT

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

Diversification Opportunities for Simon Property and Smart REIT

0.14

Correlation Coefficient

Simon Property  Smart REIT

Average diversification

The 3 months correlation between Simon and Smart is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Smart REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart REIT 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 Smart REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart REIT has no effect on the direction of Simon Property i.e., Simon Property and Smart REIT go up and down completely randomly.

Pair Corralation between Simon Property and Smart REIT

Assuming the 90 days trading horizon Simon Property is expected to generate 1.38 times less return on investment than Smart REIT. But when comparing it to its historical volatility, Simon Property Group is 2.49 times less risky than Smart REIT. It trades about 0.04 of its potential returns per unit of risk. Smart REIT is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,697  in Smart REIT on September 13, 2024 and sell it today you would earn a total of  110.00  from holding Smart REIT or generate 6.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.77%
Values	Daily Returns

Simon Property Group  vs.  Smart REIT

Simon Property Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady technical and fundamental indicators, Simon Property is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Smart REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent 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.

Pair Trading with Simon Property and Smart REIT

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

The idea behind Simon Property Group and Smart REIT 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.