Correlation Between TRAINLINE PLC and Aozora Bank
Can any of the company-specific risk be diversified away by investing in both TRAINLINE PLC and Aozora Bank 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 Aozora Bank 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 Aozora Bank, you can compare the effects of market volatilities on TRAINLINE PLC and Aozora Bank 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 Aozora Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAINLINE PLC and Aozora Bank.
Diversification Opportunities for TRAINLINE PLC and Aozora Bank
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between TRAINLINE and Aozora is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Aozora Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aozora Bank 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 Aozora Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aozora Bank has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Aozora Bank go up and down completely randomly.
Pair Corralation between TRAINLINE PLC and Aozora Bank
Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to under-perform the Aozora Bank. In addition to that, TRAINLINE PLC is 1.41 times more volatile than Aozora Bank. It trades about -0.24 of its total potential returns per unit of risk. Aozora Bank is currently generating about -0.03 per unit of volatility. If you would invest 1,440 in Aozora Bank on October 16, 2024 and sell it today you would lose (10.00) from holding Aozora Bank or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TRAINLINE PLC LS vs. Aozora Bank
Performance |
| Timeline |
| TRAINLINE PLC LS |
| Aozora Bank |
TRAINLINE PLC and Aozora Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRAINLINE PLC and Aozora Bank
The main advantage of trading using opposite TRAINLINE PLC and Aozora Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAINLINE PLC position performs unexpectedly, Aozora Bank 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 Aozora Bank will offset losses from the drop in Aozora Bank's long position.| TRAINLINE PLC vs. ON SEMICONDUCTOR | TRAINLINE PLC vs. OBSERVE MEDICAL ASA | TRAINLINE PLC vs. Semiconductor Manufacturing International | TRAINLINE PLC vs. Taiwan Semiconductor Manufacturing |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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