Correlation Between TRAINLINE PLC and Nomura Holdings

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

Diversification Opportunities for TRAINLINE PLC and Nomura Holdings

0.9

Correlation Coefficient

TRAINLINE PLC  Nomura Holdings

Almost no diversification

The 3 months correlation between TRAINLINE and Nomura is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Nomura Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura 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 Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Nomura Holdings go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and Nomura Holdings

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to under-perform the Nomura Holdings. In addition to that, TRAINLINE PLC is 1.12 times more volatile than Nomura Holdings. It trades about -0.14 of its total potential returns per unit of risk. Nomura Holdings is currently generating about -0.1 per unit of volatility. If you would invest  570.00  in Nomura Holdings on October 9, 2024 and sell it today you would lose (16.00) from holding Nomura Holdings or give up 2.81% of portfolio value over 90 days.

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

TRAINLINE PLC LS  vs.  Nomura Holdings

TRAINLINE PLC LS

Risk-Adjusted Performance

14 of 100

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.

Nomura Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nomura Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAINLINE PLC and Nomura Holdings

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

The idea behind TRAINLINE PLC LS and Nomura 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.