Correlation Between First and Lindsell Train

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

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

Diversification Opportunities for First and Lindsell Train

-0.7

Correlation Coefficient

First  Lindsell Train

Excellent diversification

The 3 months correlation between First and Lindsell is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Class 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 First 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 First Class 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 First i.e., First and Lindsell Train go up and down completely randomly.

Pair Corralation between First and Lindsell Train

Assuming the 90 days trading horizon First Class Metals is expected to under-perform the Lindsell Train. In addition to that, First is 2.57 times more volatile than Lindsell Train Investment. It trades about -0.01 of its total potential returns per unit of risk. Lindsell Train Investment is currently generating about 0.11 per unit of volatility. If you would invest  73,900  in Lindsell Train Investment on October 23, 2024 and sell it today you would earn a total of  8,400  from holding Lindsell Train Investment or generate 11.37% return on investment over 90 days.

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

First Class Metals  vs.  Lindsell Train Investment

First Class Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lindsell Train Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 8 (%) 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 First and Lindsell Train

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

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.