Correlation Between TRAINLINE PLC and Sumitomo Rubber
Can any of the company-specific risk be diversified away by investing in both TRAINLINE PLC and Sumitomo Rubber 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 Sumitomo Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TRAINLINE PLC LS and Sumitomo Rubber Industries, you can compare the effects of market volatilities on TRAINLINE PLC and Sumitomo Rubber 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 Sumitomo Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAINLINE PLC and Sumitomo Rubber.
Diversification Opportunities for TRAINLINE PLC and Sumitomo Rubber
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TRAINLINE and Sumitomo is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu 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 LS are associated (or correlated) with Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Sumitomo Rubber go up and down completely randomly.
Pair Corralation between TRAINLINE PLC and Sumitomo Rubber
Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 1.04 times more return on investment than Sumitomo Rubber. However, TRAINLINE PLC is 1.04 times more volatile than Sumitomo Rubber Industries. It trades about 0.07 of its potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.0 per unit of risk. If you would invest 352.00 in TRAINLINE PLC LS on September 1, 2024 and sell it today you would earn a total of 130.00 from holding TRAINLINE PLC LS or generate 36.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TRAINLINE PLC LS vs. Sumitomo Rubber Industries
Performance |
| Timeline |
| TRAINLINE PLC LS |
| Sumitomo Rubber Indu |
TRAINLINE PLC and Sumitomo Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRAINLINE PLC and Sumitomo Rubber
The main advantage of trading using opposite TRAINLINE PLC and Sumitomo Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAINLINE PLC position performs unexpectedly, Sumitomo Rubber 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 Sumitomo Rubber will offset losses from the drop in Sumitomo Rubber's long position.| TRAINLINE PLC vs. Mitsubishi Gas Chemical | TRAINLINE PLC vs. Nordic Semiconductor ASA | TRAINLINE PLC vs. Tower Semiconductor | TRAINLINE PLC vs. SEKISUI CHEMICAL |
| Sumitomo Rubber vs. SEKISUI CHEMICAL | Sumitomo Rubber vs. Sanyo Chemical Industries | Sumitomo Rubber vs. WESTLAKE CHEMICAL | Sumitomo Rubber vs. Lendlease Group |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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