Correlation Between Merlin Properties and Ferrovial

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

Diversification Opportunities for Merlin Properties and Ferrovial

0.19

Correlation Coefficient

Merlin Properties  Ferrovial

Average diversification

The 3 months correlation between Merlin and Ferrovial is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Merlin Properties SOCIMI and Ferrovial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrovial 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 Ferrovial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrovial has no effect on the direction of Merlin Properties i.e., Merlin Properties and Ferrovial go up and down completely randomly.

Pair Corralation between Merlin Properties and Ferrovial

Assuming the 90 days trading horizon Merlin Properties is expected to generate 2.08 times less return on investment than Ferrovial. In addition to that, Merlin Properties is 1.36 times more volatile than Ferrovial. It trades about 0.04 of its total potential returns per unit of risk. Ferrovial is currently generating about 0.1 per unit of volatility. If you would invest  2,350  in Ferrovial on September 14, 2024 and sell it today you would earn a total of  1,726  from holding Ferrovial or generate 73.45% return on investment over 90 days.

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

Merlin Properties SOCIMI  vs.  Ferrovial

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.

Ferrovial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrovial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Ferrovial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Merlin Properties and Ferrovial

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

The idea behind Merlin Properties SOCIMI and Ferrovial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.