Correlation Between Lindsell Train and British American
Can any of the company-specific risk be diversified away by investing in both Lindsell Train and British American 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 Lindsell Train and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lindsell Train Investment and British American Tobacco, you can compare the effects of market volatilities on Lindsell Train and British American 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 Lindsell Train with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindsell Train and British American.
Diversification Opportunities for Lindsell Train and British American
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lindsell and British is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Lindsell Train 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 Lindsell Train Investment are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Lindsell Train i.e., Lindsell Train and British American go up and down completely randomly.
Pair Corralation between Lindsell Train and British American
Assuming the 90 days trading horizon Lindsell Train is expected to generate 2.09 times less return on investment than British American. But when comparing it to its historical volatility, Lindsell Train Investment is 1.26 times less risky than British American. It trades about 0.08 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,620 in British American Tobacco on December 24, 2024 and sell it today you would earn a total of 471.00 from holding British American Tobacco or generate 13.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Lindsell Train Investment vs. British American Tobacco
Performance |
Timeline |
Lindsell Train Investment |
British American Tobacco |
Lindsell Train and British American Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lindsell Train and British American
The main advantage of trading using opposite Lindsell Train and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindsell Train position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.Lindsell Train vs. GoldMining | Lindsell Train vs. Beowulf Mining | Lindsell Train vs. Adriatic Metals | Lindsell Train vs. Hochschild Mining plc |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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