Correlation Between TRAINLINE PLC and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both TRAINLINE PLC and JAPAN TOBACCO 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 JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on TRAINLINE PLC and JAPAN TOBACCO 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 JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAINLINE PLC and JAPAN TOBACCO.
Diversification Opportunities for TRAINLINE PLC and JAPAN TOBACCO
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between TRAINLINE and JAPAN is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between TRAINLINE PLC and JAPAN TOBACCO
Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 1.68 times more return on investment than JAPAN TOBACCO. However, TRAINLINE PLC is 1.68 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.04 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.05 per unit of risk. If you would invest 302.00 in TRAINLINE PLC LS on October 30, 2024 and sell it today you would earn a total of 130.00 from holding TRAINLINE PLC LS or generate 43.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TRAINLINE PLC LS vs. JAPAN TOBACCO UNSPADR12
Performance |
| Timeline |
| TRAINLINE PLC LS |
| JAPAN TOBACCO UNSPADR12 |
TRAINLINE PLC and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRAINLINE PLC and JAPAN TOBACCO
The main advantage of trading using opposite TRAINLINE PLC and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAINLINE PLC position performs unexpectedly, JAPAN TOBACCO 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 JAPAN TOBACCO will offset losses from the drop in JAPAN TOBACCO's long position.| TRAINLINE PLC vs. FANDIFI TECHNOLOGY P | TRAINLINE PLC vs. IDP EDUCATION LTD | TRAINLINE PLC vs. AECOM TECHNOLOGY | TRAINLINE PLC vs. DEVRY EDUCATION GRP |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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