Correlation Between St Galler and Trainline Plc

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

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

Diversification Opportunities for St Galler and Trainline Plc

0.58

Correlation Coefficient

St Galler  Trainline Plc

Very weak diversification

The 3 months correlation between 0QQZ and Trainline is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding St Galler Kantonalbank and Trainline Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trainline Plc and St Galler 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 St Galler Kantonalbank 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 St Galler i.e., St Galler and Trainline Plc go up and down completely randomly.

Pair Corralation between St Galler and Trainline Plc

Assuming the 90 days trading horizon St Galler is expected to generate 4.48 times less return on investment than Trainline Plc. But when comparing it to its historical volatility, St Galler Kantonalbank is 2.81 times less risky than Trainline Plc. It trades about 0.14 of its potential returns per unit of risk. Trainline Plc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  32,900  in Trainline Plc on September 13, 2024 and sell it today you would earn a total of  10,440  from holding Trainline Plc or generate 31.73% return on investment over 90 days.

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

St Galler Kantonalbank  vs.  Trainline Plc

St Galler Kantonalbank

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in St Galler Kantonalbank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, St Galler may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Trainline Plc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trainline Plc are ranked lower than 17 (%) 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 St Galler and Trainline Plc

The main advantage of trading using opposite St Galler and Trainline Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if St Galler 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 St Galler Kantonalbank 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.