Correlation Between Gaztransport and Trainline Plc

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

By analyzing existing cross correlation between Gaztransport et Technigaz and Trainline Plc, you can compare the effects of market volatilities on Gaztransport and Trainline Plc 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 Gaztransport with a short position of Trainline Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaztransport and Trainline Plc.

Diversification Opportunities for Gaztransport and Trainline Plc

0.81

Correlation Coefficient

Gaztransport  Trainline Plc

Very poor diversification

The 3 months correlation between Gaztransport and Trainline is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport et Technigaz and Trainline Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trainline Plc and Gaztransport 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 Gaztransport et Technigaz are associated (or correlated) with Trainline Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trainline Plc has no effect on the direction of Gaztransport i.e., Gaztransport and Trainline Plc go up and down completely randomly.

Pair Corralation between Gaztransport and Trainline Plc

Assuming the 90 days trading horizon Gaztransport is expected to generate 7.65 times less return on investment than Trainline Plc. But when comparing it to its historical volatility, Gaztransport et Technigaz is 1.63 times less risky than Trainline Plc. It trades about 0.05 of its potential returns per unit of risk. Trainline Plc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  32,640  in Trainline Plc on September 18, 2024 and sell it today you would earn a total of  10,020  from holding Trainline Plc or generate 30.7% return on investment over 90 days.

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

Gaztransport et Technigaz  vs.  Trainline Plc

Gaztransport et Technigaz

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport et Technigaz are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gaztransport is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Trainline Plc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trainline Plc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Trainline Plc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gaztransport and Trainline Plc

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

The idea behind Gaztransport et Technigaz and Trainline Plc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.