Correlation Between Liberty Media and Lindsell Train

Can any of the company-specific risk be diversified away by investing in both Liberty Media and Lindsell Train 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 Liberty Media and Lindsell Train into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Liberty Media Corp and Lindsell Train Investment, you can compare the effects of market volatilities on Liberty Media and Lindsell Train 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 Liberty Media with a short position of Lindsell Train. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and Lindsell Train.

Diversification Opportunities for Liberty Media and Lindsell Train

-0.55

Correlation Coefficient

Liberty Media  Lindsell Train

Excellent diversification

The 3 months correlation between Liberty and Lindsell is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media Corp and Lindsell Train Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsell Train Investment and Liberty Media 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 Liberty Media Corp are associated (or correlated) with Lindsell Train. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsell Train Investment has no effect on the direction of Liberty Media i.e., Liberty Media and Lindsell Train go up and down completely randomly.

Pair Corralation between Liberty Media and Lindsell Train

Assuming the 90 days trading horizon Liberty Media Corp is expected to generate 1.54 times more return on investment than Lindsell Train. However, Liberty Media is 1.54 times more volatile than Lindsell Train Investment. It trades about 0.05 of its potential returns per unit of risk. Lindsell Train Investment is currently generating about -0.05 per unit of risk. If you would invest  5,604  in Liberty Media Corp on September 13, 2024 and sell it today you would earn a total of  2,855  from holding Liberty Media Corp or generate 50.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.95%
Values	Daily Returns

Liberty Media Corp  vs.  Lindsell Train Investment

Liberty Media Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Liberty Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lindsell Train Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lindsell Train Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Lindsell Train is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Liberty Media and Lindsell Train

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

The idea behind Liberty Media Corp and Lindsell Train Investment 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.