Correlation Between Cornish Metals and Lindsell Train

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

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

Diversification Opportunities for Cornish Metals and Lindsell Train

-0.24

Correlation Coefficient

Cornish Metals  Lindsell Train

Very good diversification

The 3 months correlation between Cornish and Lindsell is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Cornish Metals 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 Cornish Metals 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 Cornish Metals 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 Cornish Metals i.e., Cornish Metals and Lindsell Train go up and down completely randomly.

Pair Corralation between Cornish Metals and Lindsell Train

Assuming the 90 days trading horizon Cornish Metals is expected to generate 2.51 times more return on investment than Lindsell Train. However, Cornish Metals is 2.51 times more volatile than Lindsell Train Investment. It trades about 0.17 of its potential returns per unit of risk. Lindsell Train Investment is currently generating about 0.33 per unit of risk. If you would invest  780.00  in Cornish Metals on September 19, 2024 and sell it today you would earn a total of  110.00  from holding Cornish Metals or generate 14.1% return on investment over 90 days.

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

Cornish Metals  vs.  Lindsell Train Investment

Cornish Metals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cornish Metals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cornish Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lindsell Train Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Lindsell Train is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cornish Metals and Lindsell Train

The main advantage of trading using opposite Cornish Metals and Lindsell Train positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cornish Metals 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 Cornish Metals 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.