Correlation Between Big 5 and TRAINLINE PLC

Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and TRAINLINE PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big 5 Sporting and TRAINLINE PLC LS, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of TRAINLINE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and TRAINLINE PLC.

Diversification Opportunities for Big 5 and TRAINLINE PLC

-0.65

Correlation Coefficient

Big 5  TRAINLINE PLC

Excellent diversification

The 3 months correlation between Big and TRAINLINE is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting 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 Big 5 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 Big 5 Sporting 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 Big 5 i.e., Big 5 and TRAINLINE PLC go up and down completely randomly.

Pair Corralation between Big 5 and TRAINLINE PLC

Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the TRAINLINE PLC. In addition to that, Big 5 is 1.84 times more volatile than TRAINLINE PLC LS. It trades about -0.01 of its total potential returns per unit of risk. TRAINLINE PLC LS is currently generating about 0.22 per unit of volatility. If you would invest  350.00  in TRAINLINE PLC LS on August 31, 2024 and sell it today you would earn a total of  130.00  from holding TRAINLINE PLC LS or generate 37.14% return on investment over 90 days.

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

Big 5 Sporting  vs.  TRAINLINE PLC LS

Big 5 Sporting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Big 5 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 Big 5 and TRAINLINE PLC

The main advantage of trading using opposite Big 5 and TRAINLINE PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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 Big 5 Sporting 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.