Correlation Between Elaia Investment and Merlin Properties

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

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

Diversification Opportunities for Elaia Investment and Merlin Properties

0.32

Correlation Coefficient

Elaia Investment  Merlin Properties

Weak diversification

The 3 months correlation between Elaia and Merlin is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Elaia Investment Spain 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 Elaia Investment 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 Elaia Investment Spain 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 Elaia Investment i.e., Elaia Investment and Merlin Properties go up and down completely randomly.

Pair Corralation between Elaia Investment and Merlin Properties

Assuming the 90 days trading horizon Elaia Investment Spain is expected to under-perform the Merlin Properties. But the stock apears to be less risky and, when comparing its historical volatility, Elaia Investment Spain is 1.09 times less risky than Merlin Properties. The stock trades about -0.38 of its potential returns per unit of risk. The Merlin Properties SOCIMI is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Merlin Properties SOCIMI on December 27, 2024 and sell it today you would lose (24.00) from holding Merlin Properties SOCIMI or give up 2.38% of portfolio value over 90 days.

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

Elaia Investment Spain  vs.  Merlin Properties SOCIMI

Elaia Investment Spain

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elaia Investment Spain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with Elaia Investment and Merlin Properties

The main advantage of trading using opposite Elaia Investment and Merlin Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elaia Investment 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 Elaia Investment Spain 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 Transaction History module to view history of all your transactions and understand their impact on performance.