Correlation Between COPT Defense and Simon Property

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

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

Diversification Opportunities for COPT Defense and Simon Property

0.89

Correlation Coefficient

COPT Defense  Simon Property

Very poor diversification

The 3 months correlation between COPT and Simon is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding COPT Defense Properties 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 COPT Defense 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 COPT Defense Properties 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 COPT Defense i.e., COPT Defense and Simon Property go up and down completely randomly.

Pair Corralation between COPT Defense and Simon Property

Considering the 90-day investment horizon COPT Defense is expected to generate 1.95 times less return on investment than Simon Property. In addition to that, COPT Defense is 1.0 times more volatile than Simon Property Group. It trades about 0.04 of its total potential returns per unit of risk. Simon Property Group is currently generating about 0.08 per unit of volatility. If you would invest  10,746  in Simon Property Group on August 15, 2024 and sell it today you would earn a total of  7,076  from holding Simon Property Group or generate 65.85% return on investment over 90 days.

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

COPT Defense Properties  vs.  Simon Property Group

COPT Defense Properties

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COPT Defense Properties are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, COPT Defense may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Simon Property Group

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simon Property Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Simon Property reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COPT Defense and Simon Property

The main advantage of trading using opposite COPT Defense and Simon Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COPT Defense 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 COPT Defense Properties 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.