Correlation Between TRAINLINE PLC and National Bank

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

Diversification Opportunities for TRAINLINE PLC and National Bank

0.83

Correlation Coefficient

TRAINLINE PLC  National Bank

Very poor diversification

The 3 months correlation between TRAINLINE and National is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and National Bank go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and National Bank

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 1.18 times more return on investment than National Bank. However, TRAINLINE PLC is 1.18 times more volatile than National Bank Holdings. It trades about 0.04 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.02 per unit of risk. If you would invest  336.00  in TRAINLINE PLC LS on October 5, 2024 and sell it today you would earn a total of  164.00  from holding TRAINLINE PLC LS or generate 48.81% return on investment over 90 days.

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

TRAINLINE PLC LS  vs.  National Bank Holdings

TRAINLINE PLC LS

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days TRAINLINE PLC LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, TRAINLINE PLC reported solid returns over the last few months and may actually be approaching a breakup point.

National Bank Holdings

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAINLINE PLC and National Bank

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

The idea behind TRAINLINE PLC LS and National Bank Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.