Correlation Between Trainline Plc and Air Products

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

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

Diversification Opportunities for Trainline Plc and Air Products

-0.35

Correlation Coefficient

Trainline Plc  Air Products

Very good diversification

The 3 months correlation between Trainline and Air is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Trainline Plc and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals and Trainline Plc 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 Trainline Plc are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Trainline Plc i.e., Trainline Plc and Air Products go up and down completely randomly.

Pair Corralation between Trainline Plc and Air Products

Assuming the 90 days trading horizon Trainline Plc is expected to under-perform the Air Products. In addition to that, Trainline Plc is 1.66 times more volatile than Air Products Chemicals. It trades about -0.17 of its total potential returns per unit of risk. Air Products Chemicals is currently generating about -0.05 per unit of volatility. If you would invest  33,231  in Air Products Chemicals on November 28, 2024 and sell it today you would lose (1,546) from holding Air Products Chemicals or give up 4.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Trainline Plc  vs.  Air Products Chemicals

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Air Products Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Products Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Air Products 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 Trainline Plc and Air Products

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

The idea behind Trainline Plc and Air Products Chemicals 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.