Correlation Between Trainline Plc and Fair Oaks

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

By analyzing existing cross correlation between Trainline Plc and Fair Oaks Income, you can compare the effects of market volatilities on Trainline Plc and Fair Oaks 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 Fair Oaks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trainline Plc and Fair Oaks.

Diversification Opportunities for Trainline Plc and Fair Oaks

0.71

Correlation Coefficient

Trainline Plc  Fair Oaks

Poor diversification

The 3 months correlation between Trainline and Fair is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Trainline Plc and Fair Oaks Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Oaks Income 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 Fair Oaks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Oaks Income has no effect on the direction of Trainline Plc i.e., Trainline Plc and Fair Oaks go up and down completely randomly.

Pair Corralation between Trainline Plc and Fair Oaks

Assuming the 90 days trading horizon Trainline Plc is expected to generate 3.41 times more return on investment than Fair Oaks. However, Trainline Plc is 3.41 times more volatile than Fair Oaks Income. It trades about 0.06 of its potential returns per unit of risk. Fair Oaks Income is currently generating about 0.16 per unit of risk. If you would invest  40,000  in Trainline Plc on October 6, 2024 and sell it today you would earn a total of  1,680  from holding Trainline Plc or generate 4.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Trainline Plc  vs.  Fair Oaks Income

Trainline Plc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trainline Plc are ranked lower than 15 (%) 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.

Fair Oaks Income

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Oaks Income are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fair Oaks is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Trainline Plc and Fair Oaks

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

The idea behind Trainline Plc and Fair Oaks Income 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 Transaction History module to view history of all your transactions and understand their impact on performance.