Correlation Between Train Alliance and USWE Sports

Can any of the company-specific risk be diversified away by investing in both Train Alliance and USWE Sports 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 Train Alliance and USWE Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Train Alliance Sweden and USWE Sports AB, you can compare the effects of market volatilities on Train Alliance and USWE Sports 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 Train Alliance with a short position of USWE Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Train Alliance and USWE Sports.

Diversification Opportunities for Train Alliance and USWE Sports

0.46

Correlation Coefficient

Train Alliance  USWE Sports

Very weak diversification

The 3 months correlation between Train and USWE is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Train Alliance Sweden and USWE Sports AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE Sports AB and Train Alliance 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 Train Alliance Sweden are associated (or correlated) with USWE Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE Sports AB has no effect on the direction of Train Alliance i.e., Train Alliance and USWE Sports go up and down completely randomly.

Pair Corralation between Train Alliance and USWE Sports

Assuming the 90 days trading horizon Train Alliance Sweden is expected to under-perform the USWE Sports. But the stock apears to be less risky and, when comparing its historical volatility, Train Alliance Sweden is 1.54 times less risky than USWE Sports. The stock trades about -0.14 of its potential returns per unit of risk. The USWE Sports AB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  905.00  in USWE Sports AB on December 30, 2024 and sell it today you would lose (30.00) from holding USWE Sports AB or give up 3.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Train Alliance Sweden  vs.  USWE Sports AB

Train Alliance Sweden

Risk-Adjusted Performance

Very Weak

Over the last 90 days Train Alliance Sweden has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

USWE Sports AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days USWE Sports AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, USWE Sports is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Train Alliance and USWE Sports

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

The idea behind Train Alliance Sweden and USWE Sports AB 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.