Correlation Between GM and Merlin Properties

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

By analyzing existing cross correlation between General Motors and Merlin Properties SOCIMI, you can compare the effects of market volatilities on GM and Merlin 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 GM with a short position of Merlin Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Merlin Properties.

Diversification Opportunities for GM and Merlin Properties

0.72

Correlation Coefficient

GM  Merlin Properties

Poor diversification

The 3 months correlation between GM and Merlin is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Merlin Properties SOCIMI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merlin Properties SOCIMI and GM 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 General Motors are associated (or correlated) with Merlin Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merlin Properties SOCIMI has no effect on the direction of GM i.e., GM and Merlin Properties go up and down completely randomly.

Pair Corralation between GM and Merlin Properties

Allowing for the 90-day total investment horizon GM is expected to generate 2.03 times less return on investment than Merlin Properties. In addition to that, GM is 1.34 times more volatile than Merlin Properties SOCIMI. It trades about 0.14 of its total potential returns per unit of risk. Merlin Properties SOCIMI is currently generating about 0.4 per unit of volatility. If you would invest  883.00  in Merlin Properties SOCIMI on February 4, 2024 and sell it today you would earn a total of  190.00  from holding Merlin Properties SOCIMI or generate 21.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

General Motors  vs.  Merlin Properties SOCIMI

General Motors

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Merlin Properties SOCIMI

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Merlin Properties SOCIMI are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Merlin Properties exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Merlin Properties

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

The idea behind General Motors and Merlin Properties SOCIMI 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.