Correlation Between Endo International and Trainline Plc

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

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

Diversification Opportunities for Endo International and Trainline Plc

-0.69

Correlation Coefficient

Endo International  Trainline Plc

Excellent diversification

The 3 months correlation between Endo and Trainline is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Endo International PLC and Trainline Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trainline Plc and Endo International 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 Endo International PLC 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 Endo International i.e., Endo International and Trainline Plc go up and down completely randomly.

Pair Corralation between Endo International and Trainline Plc

Assuming the 90 days trading horizon Endo International PLC is expected to under-perform the Trainline Plc. But the stock apears to be less risky and, when comparing its historical volatility, Endo International PLC is 2.27 times less risky than Trainline Plc. The stock trades about -0.09 of its potential returns per unit of risk. The Trainline Plc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  30,460  in Trainline Plc on September 2, 2024 and sell it today you would earn a total of  10,320  from holding Trainline Plc or generate 33.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Endo International PLC  vs.  Trainline Plc

Endo International PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Endo International PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Endo International is not utilizing all of its potentials. The latest 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 unsteady 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 Endo International and Trainline Plc

The main advantage of trading using opposite Endo International and Trainline Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endo International 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 Endo International PLC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.