Correlation Between Induction Healthcare and Trainline Plc

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

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

Diversification Opportunities for Induction Healthcare and Trainline Plc

0.93

Correlation Coefficient

Induction Healthcare  Trainline Plc

Almost no diversification

The 3 months correlation between Induction and Trainline is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Induction Healthcare Group and Trainline Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trainline Plc and Induction Healthcare 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 Induction Healthcare 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 Induction Healthcare i.e., Induction Healthcare and Trainline Plc go up and down completely randomly.

Pair Corralation between Induction Healthcare and Trainline Plc

Assuming the 90 days trading horizon Induction Healthcare Group is expected to under-perform the Trainline Plc. But the stock apears to be less risky and, when comparing its historical volatility, Induction Healthcare Group is 1.38 times less risky than Trainline Plc. The stock trades about -0.28 of its potential returns per unit of risk. The Trainline Plc is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  43,320  in Trainline Plc on December 24, 2024 and sell it today you would lose (14,620) from holding Trainline Plc or give up 33.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Induction Healthcare Group  vs.  Trainline Plc

Induction Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Induction Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Trainline Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trainline Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Induction Healthcare and Trainline Plc

The main advantage of trading using opposite Induction Healthcare and Trainline Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Induction Healthcare 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 Induction Healthcare 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.