Correlation Between Merlin Properties and GMP Property

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

Diversification Opportunities for Merlin Properties and GMP Property

-0.1

Correlation Coefficient

Merlin Properties  GMP Property

Good diversification

The 3 months correlation between Merlin and GMP is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Merlin Properties SOCIMI and GMP Property SOCIMI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMP Property SOCIMI 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 GMP Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMP Property SOCIMI has no effect on the direction of Merlin Properties i.e., Merlin Properties and GMP Property go up and down completely randomly.

Pair Corralation between Merlin Properties and GMP Property

Assuming the 90 days trading horizon Merlin Properties SOCIMI is expected to generate 0.98 times more return on investment than GMP Property. However, Merlin Properties SOCIMI is 1.02 times less risky than GMP Property. It trades about 0.31 of its potential returns per unit of risk. GMP Property SOCIMI is currently generating about -0.03 per unit of risk. If you would invest  971.00  in Merlin Properties SOCIMI on April 24, 2025 and sell it today you would earn a total of  195.00  from holding Merlin Properties SOCIMI or generate 20.08% return on investment over 90 days.

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

Merlin Properties SOCIMI  vs.  GMP Property SOCIMI

Merlin Properties SOCIMI

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Merlin Properties SOCIMI are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Merlin Properties exhibited solid returns over the last few months and may actually be approaching a breakup point.

GMP Property SOCIMI

Risk-Adjusted Performance

Very Weak

Over the last 90 days GMP Property SOCIMI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, GMP Property is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Merlin Properties and GMP Property

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

The idea behind Merlin Properties SOCIMI and GMP Property 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.