Correlation Between Lindsell Train and Investment Company

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

Diversification Opportunities for Lindsell Train and Investment Company

-0.22

Correlation Coefficient

Lindsell Train  Investment Company

Very good diversification

The 3 months correlation between Lindsell and Investment is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and The Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Company 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 Investment Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Company has no effect on the direction of Lindsell Train i.e., Lindsell Train and Investment Company go up and down completely randomly.

Pair Corralation between Lindsell Train and Investment Company

Assuming the 90 days trading horizon Lindsell Train Investment is expected to generate 1.41 times more return on investment than Investment Company. However, Lindsell Train is 1.41 times more volatile than The Investment. It trades about 0.05 of its potential returns per unit of risk. The Investment is currently generating about -0.2 per unit of risk. If you would invest  79,300  in Lindsell Train Investment on December 26, 2024 and sell it today you would earn a total of  2,700  from holding Lindsell Train Investment or generate 3.4% 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.  The Investment

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 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Lindsell Train is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Investment Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Lindsell Train and Investment Company

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

The idea behind Lindsell Train Investment and The Investment 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.