Correlation Between Trainline Plc and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Trainline Plc and Automatic Data 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 Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trainline Plc and Automatic Data Processing, you can compare the effects of market volatilities on Trainline Plc and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trainline Plc and Automatic Data.
Diversification Opportunities for Trainline Plc and Automatic Data
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Trainline and Automatic is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Trainline Plc and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Trainline Plc i.e., Trainline Plc and Automatic Data go up and down completely randomly.
Pair Corralation between Trainline Plc and Automatic Data
Assuming the 90 days trading horizon Trainline Plc is expected to generate 1.59 times more return on investment than Automatic Data. However, Trainline Plc is 1.59 times more volatile than Automatic Data Processing. It trades about 0.11 of its potential returns per unit of risk. Automatic Data Processing is currently generating about -0.14 per unit of risk. If you would invest 41,600 in Trainline Plc on September 24, 2024 and sell it today you would earn a total of 1,320 from holding Trainline Plc or generate 3.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trainline Plc vs. Automatic Data Processing
Performance |
| Timeline |
| Trainline Plc |
| Automatic Data Processing |
Trainline Plc and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trainline Plc and Automatic Data
The main advantage of trading using opposite Trainline Plc and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trainline Plc position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| Trainline Plc vs. Teradata Corp | Trainline Plc vs. Roadside Real Estate | Trainline Plc vs. Gaztransport et Technigaz | Trainline Plc vs. BE Semiconductor Industries |
| Automatic Data vs. Playtech Plc | Automatic Data vs. Metals Exploration Plc | Automatic Data vs. Trainline Plc | Automatic Data vs. Fulcrum Metals PLC |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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