Correlation Between De Grey and TRAINLINE PLC

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

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

Diversification Opportunities for De Grey and TRAINLINE PLC

0.68

Correlation Coefficient

De Grey  TRAINLINE PLC

Poor diversification

The 3 months correlation between DGD and TRAINLINE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining 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 De Grey 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 De Grey Mining 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 De Grey i.e., De Grey and TRAINLINE PLC go up and down completely randomly.

Pair Corralation between De Grey and TRAINLINE PLC

Assuming the 90 days trading horizon De Grey Mining is expected to generate 1.24 times more return on investment than TRAINLINE PLC. However, De Grey is 1.24 times more volatile than TRAINLINE PLC LS. It trades about -0.05 of its potential returns per unit of risk. TRAINLINE PLC LS is currently generating about -0.07 per unit of risk. If you would invest  117.00  in De Grey Mining on October 12, 2024 and sell it today you would lose (3.00) from holding De Grey Mining or give up 2.56% of portfolio value over 90 days.

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

De Grey Mining  vs.  TRAINLINE PLC LS

De Grey Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

TRAINLINE PLC LS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TRAINLINE PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with De Grey and TRAINLINE PLC

The main advantage of trading using opposite De Grey and TRAINLINE PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Grey 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 De Grey Mining 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.