Correlation Between TRAINLINE PLC and CVS Health

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

Diversification Opportunities for TRAINLINE PLC and CVS Health

-0.16

Correlation Coefficient

TRAINLINE PLC  CVS Health

Good diversification

The 3 months correlation between TRAINLINE and CVS is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and CVS Health go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and CVS Health

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 0.83 times more return on investment than CVS Health. However, TRAINLINE PLC LS is 1.21 times less risky than CVS Health. It trades about 0.19 of its potential returns per unit of risk. CVS Health is currently generating about 0.0 per unit of risk. If you would invest  384.00  in TRAINLINE PLC LS on September 13, 2024 and sell it today you would earn a total of  121.00  from holding TRAINLINE PLC LS or generate 31.51% 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.  CVS Health

TRAINLINE PLC LS

Risk-Adjusted Performance

15 of 100

Solid

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.

CVS Health

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CVS Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CVS Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with TRAINLINE PLC and CVS Health

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

The idea behind TRAINLINE PLC LS and CVS Health 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.