Correlation Between Lindsell Train and Capital Drilling

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

Diversification Opportunities for Lindsell Train and Capital Drilling

-0.46

Correlation Coefficient

Lindsell Train  Capital Drilling

Very good diversification

The 3 months correlation between Lindsell and Capital is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Lindsell Train i.e., Lindsell Train and Capital Drilling go up and down completely randomly.

Pair Corralation between Lindsell Train and Capital Drilling

Assuming the 90 days trading horizon Lindsell Train Investment is expected to generate 0.69 times more return on investment than Capital Drilling. However, Lindsell Train Investment is 1.45 times less risky than Capital Drilling. It trades about 0.13 of its potential returns per unit of risk. Capital Drilling is currently generating about -0.05 per unit of risk. If you would invest  74,000  in Lindsell Train Investment on October 25, 2024 and sell it today you would earn a total of  10,600  from holding Lindsell Train Investment or generate 14.32% return on investment over 90 days.

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

Lindsell Train Investment  vs.  Capital Drilling

Lindsell Train Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Lindsell Train exhibited solid returns over the last few months and may actually be approaching a breakup point.

Capital Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Lindsell Train and Capital Drilling

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

The idea behind Lindsell Train Investment and Capital Drilling 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..