Correlation Between Aena SA and Merlin Properties

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

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

Diversification Opportunities for Aena SA and Merlin Properties

-0.37

Correlation Coefficient

Aena SA  Merlin Properties

Very good diversification

The 3 months correlation between Aena and Merlin is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Aena SA 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 Aena SA 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 Aena SA 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 Aena SA i.e., Aena SA and Merlin Properties go up and down completely randomly.

Pair Corralation between Aena SA and Merlin Properties

Assuming the 90 days trading horizon Aena SA is expected to generate 0.53 times more return on investment than Merlin Properties. However, Aena SA is 1.87 times less risky than Merlin Properties. It trades about 0.18 of its potential returns per unit of risk. Merlin Properties SOCIMI is currently generating about -0.04 per unit of risk. If you would invest  18,260  in Aena SA on August 30, 2024 and sell it today you would earn a total of  1,980  from holding Aena SA or generate 10.84% return on investment over 90 days.

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

Aena SA  vs.  Merlin Properties SOCIMI

Aena SA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aena SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Aena SA may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Merlin Properties SOCIMI

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Aena SA and Merlin Properties

The main advantage of trading using opposite Aena SA and Merlin Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aena SA 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 Aena SA 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 CEOs Directory module to screen CEOs from public companies around the world.