Correlation Between Marstons PLC and Lindsell Train

Can any of the company-specific risk be diversified away by investing in both Marstons PLC and Lindsell Train 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 Marstons PLC and Lindsell Train into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Marstons PLC and Lindsell Train Investment, you can compare the effects of market volatilities on Marstons PLC and Lindsell Train 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 Marstons PLC with a short position of Lindsell Train. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marstons PLC and Lindsell Train.

Diversification Opportunities for Marstons PLC and Lindsell Train

0.45

Correlation Coefficient

Marstons PLC  Lindsell Train

Very weak diversification

The 3 months correlation between Marstons and Lindsell is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Marstons PLC and Lindsell Train Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsell Train Investment and Marstons PLC 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 Marstons PLC are associated (or correlated) with Lindsell Train. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsell Train Investment has no effect on the direction of Marstons PLC i.e., Marstons PLC and Lindsell Train go up and down completely randomly.

Pair Corralation between Marstons PLC and Lindsell Train

Assuming the 90 days trading horizon Marstons PLC is expected to generate 13.09 times less return on investment than Lindsell Train. In addition to that, Marstons PLC is 1.26 times more volatile than Lindsell Train Investment. It trades about 0.01 of its total potential returns per unit of risk. Lindsell Train Investment is currently generating about 0.12 per unit of volatility. If you would invest  74,700  in Lindsell Train Investment on October 26, 2024 and sell it today you would earn a total of  9,400  from holding Lindsell Train Investment or generate 12.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Marstons PLC  vs.  Lindsell Train Investment

Marstons PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marstons PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Marstons PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Lindsell Train Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 9 (%) 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.

Pair Trading with Marstons PLC and Lindsell Train

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

The idea behind Marstons PLC and Lindsell Train 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.