Correlation Between Indra A and Merlin Properties

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

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

Diversification Opportunities for Indra A and Merlin Properties

0.28

Correlation Coefficient

Indra A  Merlin Properties

Modest diversification

The 3 months correlation between Indra and Merlin is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Indra A 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 Indra A 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 Indra A 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 Indra A i.e., Indra A and Merlin Properties go up and down completely randomly.

Pair Corralation between Indra A and Merlin Properties

Assuming the 90 days trading horizon Indra A is expected to generate 0.79 times more return on investment than Merlin Properties. However, Indra A is 1.26 times less risky than Merlin Properties. It trades about 0.04 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  1,659  in Indra A on September 14, 2024 and sell it today you would earn a total of  51.00  from holding Indra A or generate 3.07% return on investment over 90 days.

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

Indra A  vs.  Merlin Properties SOCIMI

Indra A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indra A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Indra A 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 Indra A and Merlin Properties

The main advantage of trading using opposite Indra A and Merlin Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indra A 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 Indra A 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.