Correlation Between Trainline Plc and Optima Health

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

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

Diversification Opportunities for Trainline Plc and Optima Health

-0.68

Correlation Coefficient

Trainline Plc  Optima Health

Excellent diversification

The 3 months correlation between Trainline and Optima is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Trainline Plc and Optima Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima Health plc 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 Optima Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Health plc has no effect on the direction of Trainline Plc i.e., Trainline Plc and Optima Health go up and down completely randomly.

Pair Corralation between Trainline Plc and Optima Health

Assuming the 90 days trading horizon Trainline Plc is expected to under-perform the Optima Health. In addition to that, Trainline Plc is 1.56 times more volatile than Optima Health plc. It trades about -0.17 of its total potential returns per unit of risk. Optima Health plc is currently generating about 0.2 per unit of volatility. If you would invest  15,250  in Optima Health plc on November 30, 2024 and sell it today you would earn a total of  3,050  from holding Optima Health plc or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Trainline Plc  vs.  Optima Health plc

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 March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Optima Health plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optima Health plc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Optima Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trainline Plc and Optima Health

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

The idea behind Trainline Plc and Optima Health 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.