Correlation Between Tubos Reunidos and Merlin Properties

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

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

Diversification Opportunities for Tubos Reunidos and Merlin Properties

0.81

Correlation Coefficient

Tubos Reunidos  Merlin Properties

Very poor diversification

The 3 months correlation between Tubos and Merlin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Tubos Reunidos 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 Tubos Reunidos 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 Tubos Reunidos 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 Tubos Reunidos i.e., Tubos Reunidos and Merlin Properties go up and down completely randomly.

Pair Corralation between Tubos Reunidos and Merlin Properties

Assuming the 90 days trading horizon Tubos Reunidos SA is expected to under-perform the Merlin Properties. In addition to that, Tubos Reunidos is 1.49 times more volatile than Merlin Properties SOCIMI. It trades about -0.13 of its total potential returns per unit of risk. Merlin Properties SOCIMI is currently generating about -0.04 per unit of volatility. If you would invest  1,093  in Merlin Properties SOCIMI on August 30, 2024 and sell it today you would lose (59.00) from holding Merlin Properties SOCIMI or give up 5.4% of portfolio value over 90 days.

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

Tubos Reunidos SA  vs.  Merlin Properties SOCIMI

Tubos Reunidos SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tubos Reunidos SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Tubos Reunidos and Merlin Properties

The main advantage of trading using opposite Tubos Reunidos and Merlin Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tubos Reunidos 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 Tubos Reunidos 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.