Correlation Between Lindsay and Austin Engineering

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

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

Diversification Opportunities for Lindsay and Austin Engineering

-0.31

Correlation Coefficient

Lindsay  Austin Engineering

Very good diversification

The 3 months correlation between Lindsay and Austin is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lindsay and Austin Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austin Engineering and Lindsay 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 Lindsay are associated (or correlated) with Austin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austin Engineering has no effect on the direction of Lindsay i.e., Lindsay and Austin Engineering go up and down completely randomly.

Pair Corralation between Lindsay and Austin Engineering

Considering the 90-day investment horizon Lindsay is expected to generate 0.21 times more return on investment than Austin Engineering. However, Lindsay is 4.68 times less risky than Austin Engineering. It trades about 0.01 of its potential returns per unit of risk. Austin Engineering Limited is currently generating about -0.01 per unit of risk. If you would invest  13,231  in Lindsay on December 2, 2024 and sell it today you would lose (19.00) from holding Lindsay or give up 0.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.85%
Values	Daily Returns

Lindsay  vs.  Austin Engineering Limited

Lindsay

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lindsay has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Lindsay is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Austin Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Austin Engineering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Austin Engineering is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lindsay and Austin Engineering

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

The idea behind Lindsay and Austin Engineering 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.