Correlation Between ON THE and TRAINLINE PLC

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

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

Diversification Opportunities for ON THE and TRAINLINE PLC

0.67

Correlation Coefficient

ON THE  TRAINLINE PLC

Poor diversification

The 3 months correlation between 9BP and TRAINLINE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ON THE BEACH and TRAINLINE PLC LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAINLINE PLC LS and ON THE 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 ON THE BEACH 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 LS has no effect on the direction of ON THE i.e., ON THE and TRAINLINE PLC go up and down completely randomly.

Pair Corralation between ON THE and TRAINLINE PLC

Assuming the 90 days horizon ON THE is expected to generate 2.67 times less return on investment than TRAINLINE PLC. But when comparing it to its historical volatility, ON THE BEACH is 1.06 times less risky than TRAINLINE PLC. It trades about 0.09 of its potential returns per unit of risk. TRAINLINE PLC LS is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  350.00  in TRAINLINE PLC LS on September 1, 2024 and sell it today you would earn a total of  132.00  from holding TRAINLINE PLC LS or generate 37.71% return on investment over 90 days.

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

ON THE BEACH  vs.  TRAINLINE PLC LS

ON THE BEACH

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ON THE BEACH are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ON THE may actually be approaching a critical reversion point that can send shares even higher in December 2024.

TRAINLINE PLC LS

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, TRAINLINE PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ON THE and TRAINLINE PLC

The main advantage of trading using opposite ON THE and TRAINLINE PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON THE 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 ON THE BEACH and TRAINLINE PLC LS 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.