Correlation Between TRAINLINE PLC and Volkswagen

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

Diversification Opportunities for TRAINLINE PLC and Volkswagen

-0.81

Correlation Coefficient

TRAINLINE PLC  Volkswagen

Pay attention - limited upside

The 3 months correlation between TRAINLINE and Volkswagen is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Volkswagen go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and Volkswagen

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 1.5 times more return on investment than Volkswagen. However, TRAINLINE PLC is 1.5 times more volatile than Volkswagen AG. It trades about 0.07 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.05 per unit of risk. If you would invest  358.00  in TRAINLINE PLC LS on October 5, 2024 and sell it today you would earn a total of  142.00  from holding TRAINLINE PLC LS or generate 39.66% return on investment over 90 days.

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

TRAINLINE PLC LS  vs.  Volkswagen AG

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.

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with TRAINLINE PLC and Volkswagen

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

The idea behind TRAINLINE PLC LS and Volkswagen AG 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.