Correlation Between Capital Drilling and Lindsell Train

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

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

Diversification Opportunities for Capital Drilling and Lindsell Train

-0.23

Correlation Coefficient

Capital Drilling  Lindsell Train

Very good diversification

The 3 months correlation between Capital and Lindsell is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling 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 Capital Drilling 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 Capital Drilling 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 Capital Drilling i.e., Capital Drilling and Lindsell Train go up and down completely randomly.

Pair Corralation between Capital Drilling and Lindsell Train

Assuming the 90 days trading horizon Capital Drilling is expected to generate 23.88 times less return on investment than Lindsell Train. But when comparing it to its historical volatility, Capital Drilling is 1.0 times less risky than Lindsell Train. It trades about 0.01 of its potential returns per unit of risk. Lindsell Train Investment is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  73,400  in Lindsell Train Investment on October 10, 2024 and sell it today you would earn a total of  7,000  from holding Lindsell Train Investment or generate 9.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Capital Drilling  vs.  Lindsell Train Investment

Capital Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capital Drilling is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Lindsell Train Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lindsell Train may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Capital Drilling and Lindsell Train

The main advantage of trading using opposite Capital Drilling and Lindsell Train positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Drilling 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 Capital Drilling 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 Stocks Directory module to find actively traded stocks across global markets.