Correlation Between Lindsell Train and Solstad Offshore

Can any of the company-specific risk be diversified away by investing in both Lindsell Train and Solstad Offshore 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 Solstad Offshore 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 Solstad Offshore ASA, you can compare the effects of market volatilities on Lindsell Train and Solstad Offshore 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 Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindsell Train and Solstad Offshore.

Diversification Opportunities for Lindsell Train and Solstad Offshore

-0.33

Correlation Coefficient

Lindsell Train  Solstad Offshore

Very good diversification

The 3 months correlation between Lindsell and Solstad is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Lindsell Train i.e., Lindsell Train and Solstad Offshore go up and down completely randomly.

Pair Corralation between Lindsell Train and Solstad Offshore

Assuming the 90 days trading horizon Lindsell Train Investment is expected to generate 0.73 times more return on investment than Solstad Offshore. However, Lindsell Train Investment is 1.37 times less risky than Solstad Offshore. It trades about 0.08 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about -0.1 per unit of risk. If you would invest  74,800  in Lindsell Train Investment on December 10, 2024 and sell it today you would earn a total of  5,200  from holding Lindsell Train Investment or generate 6.95% return on investment over 90 days.

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

Lindsell Train Investment  vs.  Solstad Offshore ASA

Lindsell Train Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Lindsell Train may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Solstad Offshore ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lindsell Train and Solstad Offshore

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

The idea behind Lindsell Train Investment and Solstad Offshore ASA 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.