Correlation Between TRAINLINE PLC and AMERICAN POTASH

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

Diversification Opportunities for TRAINLINE PLC and AMERICAN POTASH

-0.46

Correlation Coefficient

TRAINLINE PLC  AMERICAN POTASH

Very good diversification

The 3 months correlation between TRAINLINE and AMERICAN is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and AMERICAN POTASH P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN POTASH P 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 AMERICAN POTASH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN POTASH P has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and AMERICAN POTASH go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and AMERICAN POTASH

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to under-perform the AMERICAN POTASH. But the stock apears to be less risky and, when comparing its historical volatility, TRAINLINE PLC LS is 5.21 times less risky than AMERICAN POTASH. The stock trades about -0.24 of its potential returns per unit of risk. The AMERICAN POTASH P is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  11.00  in AMERICAN POTASH P on October 15, 2024 and sell it today you would earn a total of  2.00  from holding AMERICAN POTASH P or generate 18.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

TRAINLINE PLC LS  vs.  AMERICAN POTASH P

TRAINLINE PLC LS

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TRAINLINE PLC reported solid returns over the last few months and may actually be approaching a breakup point.

AMERICAN POTASH P

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMERICAN POTASH P are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AMERICAN POTASH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAINLINE PLC and AMERICAN POTASH

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

The idea behind TRAINLINE PLC LS and AMERICAN POTASH P 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.