Correlation Between TRAINLINE PLC and Broadwind

Can any of the company-specific risk be diversified away by investing in both TRAINLINE PLC and Broadwind 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 Broadwind 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 Broadwind, you can compare the effects of market volatilities on TRAINLINE PLC and Broadwind 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 Broadwind. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAINLINE PLC and Broadwind.

Diversification Opportunities for TRAINLINE PLC and Broadwind

-0.35

Correlation Coefficient

TRAINLINE PLC  Broadwind

Very good diversification

The 3 months correlation between TRAINLINE and Broadwind is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind 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 Broadwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Broadwind go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and Broadwind

Assuming the 90 days trading horizon TRAINLINE PLC is expected to generate 15.57 times less return on investment than Broadwind. But when comparing it to its historical volatility, TRAINLINE PLC LS is 1.12 times less risky than Broadwind. It trades about 0.01 of its potential returns per unit of risk. Broadwind is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  128.00  in Broadwind on March 30, 2025 and sell it today you would earn a total of  26.00  from holding Broadwind or generate 20.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

TRAINLINE PLC LS  vs.  Broadwind

TRAINLINE PLC LS

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRAINLINE PLC LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TRAINLINE PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Broadwind

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadwind are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Broadwind reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAINLINE PLC and Broadwind

The main advantage of trading using opposite TRAINLINE PLC and Broadwind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAINLINE PLC position performs unexpectedly, Broadwind 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 Broadwind will offset losses from the drop in Broadwind's long position.

The idea behind TRAINLINE PLC LS and Broadwind pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.