Correlation Between TRAINLINE PLC and Canadian National

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

Diversification Opportunities for TRAINLINE PLC and Canadian National

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between TRAINLINE and Canadian is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National Railway 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 Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Canadian National go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and Canadian National

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 1.96 times more return on investment than Canadian National. However, TRAINLINE PLC is 1.96 times more volatile than Canadian National Railway. It trades about 0.19 of its potential returns per unit of risk. Canadian National Railway is currently generating about -0.51 per unit of risk. If you would invest  480.00  in TRAINLINE PLC LS on September 23, 2024 and sell it today you would earn a total of  30.00  from holding TRAINLINE PLC LS or generate 6.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

TRAINLINE PLC LS  vs.  Canadian National Railway

 Performance 
       Timeline  
TRAINLINE PLC LS 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
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.
Canadian National Railway 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Canadian National Railway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

TRAINLINE PLC and Canadian National Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TRAINLINE PLC and Canadian National

The main advantage of trading using opposite TRAINLINE PLC and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAINLINE PLC position performs unexpectedly, Canadian National 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 Canadian National will offset losses from the drop in Canadian National's long position.
The idea behind TRAINLINE PLC LS and Canadian National Railway 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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