Correlation Between Home Capital and Merlin Properties

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

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

Diversification Opportunities for Home Capital and Merlin Properties

0.73

Correlation Coefficient

Home Capital  Merlin Properties

Poor diversification

The 3 months correlation between Home and Merlin is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Home Capital Rentals 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 Home Capital 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 Home Capital Rentals 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 Home Capital i.e., Home Capital and Merlin Properties go up and down completely randomly.

Pair Corralation between Home Capital and Merlin Properties

Assuming the 90 days trading horizon Home Capital is expected to generate 24.97 times less return on investment than Merlin Properties. But when comparing it to its historical volatility, Home Capital Rentals is 9.87 times less risky than Merlin Properties. It trades about 0.12 of its potential returns per unit of risk. Merlin Properties SOCIMI is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  966.00  in Merlin Properties SOCIMI on April 22, 2025 and sell it today you would earn a total of  197.00  from holding Merlin Properties SOCIMI or generate 20.39% return on investment over 90 days.

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

Home Capital Rentals  vs.  Merlin Properties SOCIMI

Home Capital Rentals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Capital Rentals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Home Capital 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

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.

Pair Trading with Home Capital and Merlin Properties

The main advantage of trading using opposite Home Capital and Merlin Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Capital 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 Home Capital Rentals 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.