Correlation Between Caixabank and Merlin Properties

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

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

Diversification Opportunities for Caixabank and Merlin Properties

-0.41

Correlation Coefficient

Caixabank  Merlin Properties

Very good diversification

The 3 months correlation between Caixabank and Merlin is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank 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 Caixabank 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 Caixabank 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 Caixabank i.e., Caixabank and Merlin Properties go up and down completely randomly.

Pair Corralation between Caixabank and Merlin Properties

Assuming the 90 days trading horizon Caixabank SA is expected to generate 1.12 times more return on investment than Merlin Properties. However, Caixabank is 1.12 times more volatile than Merlin Properties SOCIMI. It trades about -0.01 of its potential returns per unit of risk. Merlin Properties SOCIMI is currently generating about -0.1 per unit of risk. If you would invest  532.00  in Caixabank SA on September 14, 2024 and sell it today you would lose (15.00) from holding Caixabank SA or give up 2.82% of portfolio value over 90 days.

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

Caixabank SA  vs.  Merlin Properties SOCIMI

Caixabank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caixabank SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Caixabank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the 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 latest unsteady performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Caixabank and Merlin Properties

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