Correlation Between Merlin Properties and Lar Espana

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Can any of the company-specific risk be diversified away by investing in both Merlin Properties and Lar Espana 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 Merlin Properties and Lar Espana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merlin Properties SOCIMI and Lar Espana Real, you can compare the effects of market volatilities on Merlin Properties and Lar Espana 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 Merlin Properties with a short position of Lar Espana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merlin Properties and Lar Espana.

Diversification Opportunities for Merlin Properties and Lar Espana

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between Merlin and Lar is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Merlin Properties SOCIMI and Lar Espana Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lar Espana Real and Merlin Properties 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 Merlin Properties SOCIMI are associated (or correlated) with Lar Espana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lar Espana Real has no effect on the direction of Merlin Properties i.e., Merlin Properties and Lar Espana go up and down completely randomly.

Pair Corralation between Merlin Properties and Lar Espana

Assuming the 90 days trading horizon Merlin Properties is expected to generate 1.32 times less return on investment than Lar Espana. In addition to that, Merlin Properties is 1.07 times more volatile than Lar Espana Real. It trades about 0.08 of its total potential returns per unit of risk. Lar Espana Real is currently generating about 0.11 per unit of volatility. If you would invest  499.00  in Lar Espana Real on December 30, 2023 and sell it today you would earn a total of  223.00  from holding Lar Espana Real or generate 44.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

Merlin Properties SOCIMI  vs.  Lar Espana Real

 Performance 
       Timeline  
Merlin Properties SOCIMI 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Merlin Properties SOCIMI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Merlin Properties is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Lar Espana Real 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Lar Espana Real are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Lar Espana exhibited solid returns over the last few months and may actually be approaching a breakup point.

Merlin Properties and Lar Espana Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merlin Properties and Lar Espana

The main advantage of trading using opposite Merlin Properties and Lar Espana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merlin Properties position performs unexpectedly, Lar Espana 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 Lar Espana will offset losses from the drop in Lar Espana's long position.
The idea behind Merlin Properties SOCIMI and Lar Espana Real 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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