Correlation Between TRAINLINE PLC and Franco Nevada

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

Diversification Opportunities for TRAINLINE PLC and Franco Nevada

-0.07

Correlation Coefficient

TRAINLINE PLC  Franco Nevada

Good diversification

The 3 months correlation between TRAINLINE and Franco is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada 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 Franco Nevada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franco Nevada has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Franco Nevada go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and Franco Nevada

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 1.32 times more return on investment than Franco Nevada. However, TRAINLINE PLC is 1.32 times more volatile than Franco Nevada. It trades about 0.1 of its potential returns per unit of risk. Franco Nevada is currently generating about 0.01 per unit of risk. If you would invest  392.00  in TRAINLINE PLC LS on October 4, 2024 and sell it today you would earn a total of  108.00  from holding TRAINLINE PLC LS or generate 27.55% return on investment over 90 days.

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

TRAINLINE PLC LS  vs.  Franco Nevada

TRAINLINE PLC LS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 15 (%) 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.

Franco Nevada

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franco Nevada are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Franco Nevada is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TRAINLINE PLC and Franco Nevada

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

The idea behind TRAINLINE PLC LS and Franco Nevada 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.