Correlation Between Trinity Industries and Alstom SA
Can any of the company-specific risk be diversified away by investing in both Trinity Industries and Alstom SA 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 Trinity Industries and Alstom SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trinity Industries and Alstom SA, you can compare the effects of market volatilities on Trinity Industries and Alstom SA 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 Trinity Industries with a short position of Alstom SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trinity Industries and Alstom SA.
Diversification Opportunities for Trinity Industries and Alstom SA
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Trinity and Alstom is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Trinity Industries and Alstom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alstom SA and Trinity Industries 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 Trinity Industries are associated (or correlated) with Alstom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alstom SA has no effect on the direction of Trinity Industries i.e., Trinity Industries and Alstom SA go up and down completely randomly.
Pair Corralation between Trinity Industries and Alstom SA
Considering the 90-day investment horizon Trinity Industries is expected to generate 1.31 times less return on investment than Alstom SA. But when comparing it to its historical volatility, Trinity Industries is 2.03 times less risky than Alstom SA. It trades about 0.04 of its potential returns per unit of risk. Alstom SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,184 in Alstom SA on September 12, 2024 and sell it today you would earn a total of 141.00 from holding Alstom SA or generate 6.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trinity Industries vs. Alstom SA
Performance |
| Timeline |
| Trinity Industries |
| Alstom SA |
Trinity Industries and Alstom SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trinity Industries and Alstom SA
The main advantage of trading using opposite Trinity Industries and Alstom SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trinity Industries position performs unexpectedly, Alstom SA 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 Alstom SA will offset losses from the drop in Alstom SA's long position.| Trinity Industries vs. LB Foster | Trinity Industries vs. Freightcar America | Trinity Industries vs. Westinghouse Air Brake | Trinity Industries vs. Norfolk Southern |
| Alstom SA vs. Westinghouse Air Brake | Alstom SA vs. Canadian Pacific Railway | Alstom SA vs. Trinity Industries | Alstom SA vs. CSX Corporation |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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