Correlation Between Lindsell Train and Scandic Hotels

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

Diversification Opportunities for Lindsell Train and Scandic Hotels

0.81

Correlation Coefficient

Lindsell Train  Scandic Hotels

Very poor diversification

The 3 months correlation between Lindsell and Scandic is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group 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 Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of Lindsell Train i.e., Lindsell Train and Scandic Hotels go up and down completely randomly.

Pair Corralation between Lindsell Train and Scandic Hotels

Assuming the 90 days trading horizon Lindsell Train is expected to generate 2.32 times less return on investment than Scandic Hotels. But when comparing it to its historical volatility, Lindsell Train Investment is 1.2 times less risky than Scandic Hotels. It trades about 0.08 of its potential returns per unit of risk. Scandic Hotels Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,768  in Scandic Hotels Group on December 24, 2024 and sell it today you would earn a total of  1,000.00  from holding Scandic Hotels Group or generate 14.78% return on investment over 90 days.

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

Lindsell Train Investment  vs.  Scandic Hotels Group

Lindsell Train Investment

Risk-Adjusted Performance

Insignificant

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.

Scandic Hotels Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scandic Hotels Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Scandic Hotels unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lindsell Train and Scandic Hotels

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

The idea behind Lindsell Train Investment and Scandic Hotels Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.