Correlation Between Linc and Landmark Cars

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

By analyzing existing cross correlation between Linc Limited and Landmark Cars Limited, you can compare the effects of market volatilities on Linc and Landmark Cars 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 Linc with a short position of Landmark Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linc and Landmark Cars.

Diversification Opportunities for Linc and Landmark Cars

0.03

Correlation Coefficient

Linc  Landmark Cars

Significant diversification

The 3 months correlation between Linc and Landmark is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Linc Limited and Landmark Cars Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landmark Cars Limited and Linc 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 Linc Limited are associated (or correlated) with Landmark Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landmark Cars Limited has no effect on the direction of Linc i.e., Linc and Landmark Cars go up and down completely randomly.

Pair Corralation between Linc and Landmark Cars

Assuming the 90 days trading horizon Linc Limited is expected to generate 21.39 times more return on investment than Landmark Cars. However, Linc is 21.39 times more volatile than Landmark Cars Limited. It trades about 0.06 of its potential returns per unit of risk. Landmark Cars Limited is currently generating about 0.0 per unit of risk. If you would invest  11,470  in Linc Limited on October 26, 2024 and sell it today you would earn a total of  2,675  from holding Linc Limited or generate 23.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Linc Limited  vs.  Landmark Cars Limited

Linc Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linc Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Linc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Landmark Cars Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Landmark Cars Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Landmark Cars is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Linc and Landmark Cars

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

The idea behind Linc Limited and Landmark Cars Limited 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.