Correlation Between TRAINLINE PLC and Broadridge Financial

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

By analyzing existing cross correlation between TRAINLINE PLC LS and Broadridge Financial Solutions, you can compare the effects of market volatilities on TRAINLINE PLC and Broadridge Financial 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 TRAINLINE PLC with a short position of Broadridge Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAINLINE PLC and Broadridge Financial.

Diversification Opportunities for TRAINLINE PLC and Broadridge Financial

0.82

Correlation Coefficient

TRAINLINE PLC  Broadridge Financial

Very poor diversification

The 3 months correlation between TRAINLINE and Broadridge is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial and TRAINLINE PLC 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 TRAINLINE PLC LS are associated (or correlated) with Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Broadridge Financial go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and Broadridge Financial

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 1.78 times more return on investment than Broadridge Financial. However, TRAINLINE PLC is 1.78 times more volatile than Broadridge Financial Solutions. It trades about 0.18 of its potential returns per unit of risk. Broadridge Financial Solutions is currently generating about 0.17 per unit of risk. If you would invest  394.00  in TRAINLINE PLC LS on September 23, 2024 and sell it today you would earn a total of  116.00  from holding TRAINLINE PLC LS or generate 29.44% return on investment over 90 days.

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

TRAINLINE PLC LS  vs.  Broadridge Financial Solutions

TRAINLINE PLC LS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAINLINE PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Broadridge Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Broadridge Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAINLINE PLC and Broadridge Financial

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

The idea behind TRAINLINE PLC LS and Broadridge Financial Solutions 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.