Correlation Between Reliance Industries and Lindsell Train

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

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

Diversification Opportunities for Reliance Industries and Lindsell Train

-0.29

Correlation Coefficient

Reliance Industries  Lindsell Train

Very good diversification

The 3 months correlation between Reliance and Lindsell is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd 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 Reliance Industries 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 Reliance Industries Ltd 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 Reliance Industries i.e., Reliance Industries and Lindsell Train go up and down completely randomly.

Pair Corralation between Reliance Industries and Lindsell Train

Assuming the 90 days trading horizon Reliance Industries Ltd is expected to under-perform the Lindsell Train. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Industries Ltd is 1.04 times less risky than Lindsell Train. The stock trades about -0.05 of its potential returns per unit of risk. The Lindsell Train Investment is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  84,395  in Lindsell Train Investment on October 7, 2024 and sell it today you would lose (5,295) from holding Lindsell Train Investment or give up 6.27% of portfolio value over 90 days.

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

Reliance Industries Ltd  vs.  Lindsell Train Investment

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Ltd 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.

Lindsell Train Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lindsell Train may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Reliance Industries and Lindsell Train

The main advantage of trading using opposite Reliance Industries and Lindsell Train positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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 Reliance Industries Ltd 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.