Correlation Between TRAINLINE PLC and ARISTOCRAT LEISURE

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

Diversification Opportunities for TRAINLINE PLC and ARISTOCRAT LEISURE

0.93

Correlation Coefficient

TRAINLINE PLC  ARISTOCRAT LEISURE

Almost no diversification

The 3 months correlation between TRAINLINE and ARISTOCRAT is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and ARISTOCRAT LEISURE go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and ARISTOCRAT LEISURE

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 2.56 times more return on investment than ARISTOCRAT LEISURE. However, TRAINLINE PLC is 2.56 times more volatile than ARISTOCRAT LEISURE. It trades about 0.22 of its potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.38 per unit of risk. If you would invest  350.00  in TRAINLINE PLC LS on August 31, 2024 and sell it today you would earn a total of  130.00  from holding TRAINLINE PLC LS or generate 37.14% return on investment over 90 days.

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

TRAINLINE PLC LS  vs.  ARISTOCRAT LEISURE

TRAINLINE PLC LS

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, TRAINLINE PLC reported solid returns over the last few months and may actually be approaching a breakup point.

ARISTOCRAT LEISURE

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAINLINE PLC and ARISTOCRAT LEISURE

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

The idea behind TRAINLINE PLC LS and ARISTOCRAT LEISURE 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.