Correlation Between TRAINLINE PLC and Omeros

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

Diversification Opportunities for TRAINLINE PLC and Omeros

0.73

Correlation Coefficient

TRAINLINE PLC  Omeros

Poor diversification

The 3 months correlation between TRAINLINE and Omeros is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Omeros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omeros 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 Omeros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omeros has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Omeros go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and Omeros

Assuming the 90 days trading horizon TRAINLINE PLC is expected to generate 4.19 times less return on investment than Omeros. But when comparing it to its historical volatility, TRAINLINE PLC LS is 3.78 times less risky than Omeros. It trades about 0.11 of its potential returns per unit of risk. Omeros is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  379.00  in Omeros on September 22, 2024 and sell it today you would earn a total of  632.00  from holding Omeros or generate 166.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.24%
Values	Daily Returns

TRAINLINE PLC LS  vs.  Omeros

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.

Omeros

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Omeros are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Omeros reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAINLINE PLC and Omeros

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

The idea behind TRAINLINE PLC LS and Omeros 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.