Correlation Between Simon Property and Medical Properties

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

Diversification Opportunities for Simon Property and Medical Properties

-0.83

Correlation Coefficient

Simon Property  Medical Properties

Pay attention - limited upside

The 3 months correlation between Simon and Medical is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and Medical Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Properties Trust 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 Medical Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Properties Trust has no effect on the direction of Simon Property i.e., Simon Property and Medical Properties go up and down completely randomly.

Pair Corralation between Simon Property and Medical Properties

Considering the 90-day investment horizon Simon Property Group is expected to generate 0.34 times more return on investment than Medical Properties. However, Simon Property Group is 2.9 times less risky than Medical Properties. It trades about 0.13 of its potential returns per unit of risk. Medical Properties Trust is currently generating about -0.23 per unit of risk. If you would invest  16,302  in Simon Property Group on September 14, 2024 and sell it today you would earn a total of  1,418  from holding Simon Property Group or generate 8.7% return on investment over 90 days.

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

Simon Property Group  vs.  Medical Properties Trust

Simon Property Group

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 10 (%) 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.

Medical Properties Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Properties Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Simon Property and Medical Properties

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

The idea behind Simon Property Group and Medical Properties Trust 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.