Correlation Between TRAINLINE PLC and Wal-Mart

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

Diversification Opportunities for TRAINLINE PLC and Wal-Mart

0.21

Correlation Coefficient

TRAINLINE PLC  Wal-Mart

Modest diversification

The 3 months correlation between TRAINLINE and Wal-Mart is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Wal Mart de Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wal Mart de 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 Wal-Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wal Mart de has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Wal-Mart go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and Wal-Mart

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to under-perform the Wal-Mart. In addition to that, TRAINLINE PLC is 1.31 times more volatile than Wal Mart de Mxico. It trades about -0.18 of its total potential returns per unit of risk. Wal Mart de Mxico is currently generating about -0.05 per unit of volatility. If you would invest  272.00  in Wal Mart de Mxico on December 21, 2024 and sell it today you would lose (28.00) from holding Wal Mart de Mxico or give up 10.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

TRAINLINE PLC LS  vs.  Wal Mart de Mxico

TRAINLINE PLC LS

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRAINLINE PLC LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Wal Mart de

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wal Mart de Mxico has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with TRAINLINE PLC and Wal-Mart

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

The idea behind TRAINLINE PLC LS and Wal Mart de Mxico 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.