Correlation Between Lindsell Train and Erste Group
Can any of the company-specific risk be diversified away by investing in both Lindsell Train and Erste Group 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 Erste Group 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 Erste Group Bank, you can compare the effects of market volatilities on Lindsell Train and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindsell Train and Erste Group.
Diversification Opportunities for Lindsell Train and Erste Group
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lindsell and Erste is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Lindsell Train i.e., Lindsell Train and Erste Group go up and down completely randomly.
Pair Corralation between Lindsell Train and Erste Group
Assuming the 90 days trading horizon Lindsell Train Investment is expected to generate 1.77 times more return on investment than Erste Group. However, Lindsell Train is 1.77 times more volatile than Erste Group Bank. It trades about 0.26 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.31 per unit of risk. If you would invest 73,400 in Lindsell Train Investment on October 9, 2024 and sell it today you would earn a total of 7,600 from holding Lindsell Train Investment or generate 10.35% 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. Erste Group Bank
Performance |
| Timeline |
| Lindsell Train Investment |
| Erste Group Bank |
Lindsell Train and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lindsell Train and Erste Group
The main advantage of trading using opposite Lindsell Train and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindsell Train position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.| Lindsell Train vs. Worldwide Healthcare Trust | Lindsell Train vs. Naturhouse Health SA | Lindsell Train vs. DXC Technology Co | Lindsell Train vs. Target Healthcare REIT |
| Erste Group vs. Walmart | Erste Group vs. BYD Co | Erste Group vs. Volkswagen AG | Erste Group vs. Volkswagen AG Non Vtg |
Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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