Correlation Between TRAINLINE PLC and Capgemini

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

Diversification Opportunities for TRAINLINE PLC and Capgemini

-0.93

Correlation Coefficient

TRAINLINE PLC  Capgemini

Pay attention - limited upside

The 3 months correlation between TRAINLINE and Capgemini is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Capgemini SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capgemini SE 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 Capgemini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capgemini SE has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Capgemini go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and Capgemini

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 1.33 times more return on investment than Capgemini. However, TRAINLINE PLC is 1.33 times more volatile than Capgemini SE. It trades about 0.19 of its potential returns per unit of risk. Capgemini SE is currently generating about 0.05 per unit of risk. If you would invest  480.00  in TRAINLINE PLC LS on September 23, 2024 and sell it today you would earn a total of  30.00  from holding TRAINLINE PLC LS or generate 6.25% return on investment over 90 days.

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

TRAINLINE PLC LS  vs.  Capgemini SE

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.

Capgemini SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capgemini SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with TRAINLINE PLC and Capgemini

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

The idea behind TRAINLINE PLC LS and Capgemini SE 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..