Correlation Between INTER CARS and TRAINLINE PLC

Can any of the company-specific risk be diversified away by investing in both INTER CARS and TRAINLINE PLC 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 INTER CARS and TRAINLINE PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INTER CARS SA and TRAINLINE PLC LS, you can compare the effects of market volatilities on INTER CARS and TRAINLINE PLC 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 INTER CARS with a short position of TRAINLINE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTER CARS and TRAINLINE PLC.

Diversification Opportunities for INTER CARS and TRAINLINE PLC

-0.71

Correlation Coefficient

INTER CARS  TRAINLINE PLC

Pay attention - limited upside

The 3 months correlation between INTER and TRAINLINE is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding INTER CARS SA and TRAINLINE PLC LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAINLINE PLC LS and INTER CARS 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 INTER CARS SA are associated (or correlated) with TRAINLINE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAINLINE PLC LS has no effect on the direction of INTER CARS i.e., INTER CARS and TRAINLINE PLC go up and down completely randomly.

Pair Corralation between INTER CARS and TRAINLINE PLC

Assuming the 90 days horizon INTER CARS is expected to generate 1.1 times less return on investment than TRAINLINE PLC. But when comparing it to its historical volatility, INTER CARS SA is 1.6 times less risky than TRAINLINE PLC. It trades about 0.15 of its potential returns per unit of risk. TRAINLINE PLC LS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  456.00  in TRAINLINE PLC LS on September 5, 2024 and sell it today you would earn a total of  28.00  from holding TRAINLINE PLC LS or generate 6.14% return on investment over 90 days.

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

INTER CARS SA  vs.  TRAINLINE PLC LS

INTER CARS SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

TRAINLINE PLC LS

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 17 (%) 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.

Pair Trading with INTER CARS and TRAINLINE PLC

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

The idea behind INTER CARS SA and TRAINLINE PLC LS 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.