Correlation Between Simon Property and Herc Holdings

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

Diversification Opportunities for Simon Property and Herc Holdings

0.87

Correlation Coefficient

Simon Property  Herc Holdings

Very poor diversification

The 3 months correlation between Simon and Herc is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings 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 Herc Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herc Holdings has no effect on the direction of Simon Property i.e., Simon Property and Herc Holdings go up and down completely randomly.

Pair Corralation between Simon Property and Herc Holdings

Considering the 90-day investment horizon Simon Property is expected to generate 5.03 times less return on investment than Herc Holdings. But when comparing it to its historical volatility, Simon Property Group is 3.21 times less risky than Herc Holdings. It trades about 0.18 of its potential returns per unit of risk. Herc Holdings is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  13,488  in Herc Holdings on September 5, 2024 and sell it today you would earn a total of  9,381  from holding Herc Holdings or generate 69.55% return on investment over 90 days.

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

Simon Property Group  vs.  Herc Holdings

Simon Property Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Simon Property may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Herc Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simon Property and Herc Holdings

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

The idea behind Simon Property Group and Herc Holdings 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.