Correlation Between Intermediate Capital and Trainline Plc

Can any of the company-specific risk be diversified away by investing in both Intermediate Capital 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 Intermediate Capital and Trainline Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Intermediate Capital Group and Trainline Plc, you can compare the effects of market volatilities on Intermediate Capital 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 Intermediate Capital with a short position of Trainline Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Capital and Trainline Plc.

Diversification Opportunities for Intermediate Capital and Trainline Plc

0.21

Correlation Coefficient

Intermediate Capital  Trainline Plc

Modest diversification

The 3 months correlation between Intermediate and Trainline is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Capital Group and Trainline Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trainline Plc and Intermediate Capital 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 Intermediate Capital Group 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 has no effect on the direction of Intermediate Capital i.e., Intermediate Capital and Trainline Plc go up and down completely randomly.

Pair Corralation between Intermediate Capital and Trainline Plc

Assuming the 90 days trading horizon Intermediate Capital is expected to generate 7.29 times less return on investment than Trainline Plc. But when comparing it to its historical volatility, Intermediate Capital Group is 1.13 times less risky than Trainline Plc. It trades about 0.03 of its potential returns per unit of risk. Trainline Plc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  32,820  in Trainline Plc on October 9, 2024 and sell it today you would earn a total of  7,760  from holding Trainline Plc or generate 23.64% return on investment over 90 days.

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

Intermediate Capital Group  vs.  Trainline Plc

Intermediate Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Capital Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Intermediate Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Trainline Plc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trainline Plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Trainline Plc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intermediate Capital and Trainline Plc

The main advantage of trading using opposite Intermediate Capital and Trainline Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Capital 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 Intermediate Capital Group and Trainline Plc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.