Correlation Between Lindsell Train and DB Physical

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

Diversification Opportunities for Lindsell Train and DB Physical

0.78

Correlation Coefficient

Lindsell Train  DB Physical

Poor diversification

The 3 months correlation between Lindsell and XGLS is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and DB Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Physical Gold 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 DB Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Physical Gold has no effect on the direction of Lindsell Train i.e., Lindsell Train and DB Physical go up and down completely randomly.

Pair Corralation between Lindsell Train and DB Physical

Assuming the 90 days trading horizon Lindsell Train Investment is expected to generate 1.91 times more return on investment than DB Physical. However, Lindsell Train is 1.91 times more volatile than DB Physical Gold. It trades about 0.21 of its potential returns per unit of risk. DB Physical Gold is currently generating about 0.21 per unit of risk. If you would invest  71,700  in Lindsell Train Investment on November 28, 2024 and sell it today you would earn a total of  14,700  from holding Lindsell Train Investment or generate 20.5% return on investment over 90 days.

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

Lindsell Train Investment  vs.  DB Physical Gold

Lindsell Train Investment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lindsell Train exhibited solid returns over the last few months and may actually be approaching a breakup point.

DB Physical Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DB Physical Gold are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DB Physical may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Lindsell Train and DB Physical

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

The idea behind Lindsell Train Investment and DB Physical Gold 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 Transaction History module to view history of all your transactions and understand their impact on performance.