Correlation Between TRAINLINE PLC and Pembina Pipeline

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

Diversification Opportunities for TRAINLINE PLC and Pembina Pipeline

-0.19

Correlation Coefficient

TRAINLINE PLC  Pembina Pipeline

Good diversification

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

Pair Corralation between TRAINLINE PLC and Pembina Pipeline

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 1.75 times more return on investment than Pembina Pipeline. However, TRAINLINE PLC is 1.75 times more volatile than Pembina Pipeline Corp. It trades about 0.12 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about -0.6 per unit of risk. If you would invest  492.00  in TRAINLINE PLC LS on September 27, 2024 and sell it today you would earn a total of  18.00  from holding TRAINLINE PLC LS or generate 3.66% 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.  Pembina Pipeline Corp

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.

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with TRAINLINE PLC and Pembina Pipeline

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

The idea behind TRAINLINE PLC LS and Pembina Pipeline Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.