Correlation Between TRAINLINE PLC and Dassault Systèmes

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

Diversification Opportunities for TRAINLINE PLC and Dassault Systèmes

-0.19

Correlation Coefficient

TRAINLINE PLC  Dassault Systèmes

Good diversification

The 3 months correlation between TRAINLINE and Dassault is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Dassault Systmes SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Systèmes 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 Dassault Systèmes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Systèmes has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Dassault Systèmes go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and Dassault Systèmes

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 1.59 times more return on investment than Dassault Systèmes. However, TRAINLINE PLC is 1.59 times more volatile than Dassault Systmes SE. It trades about 0.06 of its potential returns per unit of risk. Dassault Systmes SE is currently generating about 0.07 per unit of risk. If you would invest  466.00  in TRAINLINE PLC LS on October 6, 2024 and sell it today you would earn a total of  26.00  from holding TRAINLINE PLC LS or generate 5.58% 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.  Dassault Systmes SE

TRAINLINE PLC LS

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 16 (%) 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.

Dassault Systèmes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dassault Systmes SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dassault Systèmes is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TRAINLINE PLC and Dassault Systèmes

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

The idea behind TRAINLINE PLC LS and Dassault Systmes SE 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.