Correlation Between TRAINLINE PLC and X-FAB Silicon

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

Diversification Opportunities for TRAINLINE PLC and X-FAB Silicon

-0.5

Correlation Coefficient

TRAINLINE PLC  X-FAB Silicon

Very good diversification

The 3 months correlation between TRAINLINE and X-FAB is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X-FAB Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and X-FAB Silicon go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and X-FAB Silicon

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to under-perform the X-FAB Silicon. In addition to that, TRAINLINE PLC is 1.19 times more volatile than X FAB Silicon Foundries. It trades about -0.14 of its total potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.04 per unit of volatility. If you would invest  501.00  in X FAB Silicon Foundries on October 9, 2024 and sell it today you would lose (6.00) from holding X FAB Silicon Foundries or give up 1.2% of portfolio value over 90 days.

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

TRAINLINE PLC LS  vs.  X FAB Silicon Foundries

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.

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, X-FAB Silicon is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TRAINLINE PLC and X-FAB Silicon

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

The idea behind TRAINLINE PLC LS and X FAB Silicon Foundries 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.