Correlation Between Merlin Properties and Aena SA

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

Diversification Opportunities for Merlin Properties and Aena SA

-0.17

Correlation Coefficient

Merlin Properties  Aena SA

Good diversification

The 3 months correlation between Merlin and Aena is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Merlin Properties SOCIMI and Aena SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aena SA 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 Aena SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aena SA has no effect on the direction of Merlin Properties i.e., Merlin Properties and Aena SA go up and down completely randomly.

Pair Corralation between Merlin Properties and Aena SA

Assuming the 90 days trading horizon Merlin Properties SOCIMI is expected to under-perform the Aena SA. In addition to that, Merlin Properties is 1.6 times more volatile than Aena SA. It trades about 0.0 of its total potential returns per unit of risk. Aena SA is currently generating about 0.15 per unit of volatility. If you would invest  19,910  in Aena SA on December 29, 2024 and sell it today you would earn a total of  2,070  from holding Aena SA or generate 10.4% return on investment over 90 days.

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

Merlin Properties SOCIMI  vs.  Aena SA

Merlin Properties SOCIMI

Risk-Adjusted Performance

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.

Aena SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aena SA are ranked lower than 11 (%) 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 April 2025.

Pair Trading with Merlin Properties and Aena SA

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

The idea behind Merlin Properties SOCIMI and Aena SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.