Correlation Between TRAINLINE PLC and Microsoft

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

Diversification Opportunities for TRAINLINE PLC and Microsoft

-0.44

Correlation Coefficient

TRAINLINE PLC  Microsoft

Very good diversification

The 3 months correlation between TRAINLINE and Microsoft is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and Microsoft go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and Microsoft

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to under-perform the Microsoft. In addition to that, TRAINLINE PLC is 1.57 times more volatile than Microsoft. It trades about -0.02 of its total potential returns per unit of risk. Microsoft is currently generating about 0.23 per unit of volatility. If you would invest  33,729  in Microsoft on April 24, 2025 and sell it today you would earn a total of  9,071  from holding Microsoft or generate 26.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

TRAINLINE PLC LS  vs.  Microsoft

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Microsoft displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAINLINE PLC and Microsoft

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

The idea behind TRAINLINE PLC LS and Microsoft 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.