Correlation Between Lindsell Train and CVR Energy

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

Diversification Opportunities for Lindsell Train and CVR Energy

-0.24

Correlation Coefficient

Lindsell Train  CVR Energy

Very good diversification

The 3 months correlation between Lindsell and CVR is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy 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 CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Lindsell Train i.e., Lindsell Train and CVR Energy go up and down completely randomly.

Pair Corralation between Lindsell Train and CVR Energy

Assuming the 90 days trading horizon Lindsell Train Investment is expected to generate 0.39 times more return on investment than CVR Energy. However, Lindsell Train Investment is 2.55 times less risky than CVR Energy. It trades about 0.09 of its potential returns per unit of risk. CVR Energy is currently generating about -0.07 per unit of risk. If you would invest  73,800  in Lindsell Train Investment on October 9, 2024 and sell it today you would earn a total of  7,200  from holding Lindsell Train Investment or generate 9.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Lindsell Train Investment  vs.  CVR Energy

Lindsell Train Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 7 (%) 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 February 2025.

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy 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 February 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 CVR Energy

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

The idea behind Lindsell Train Investment and CVR Energy 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.