Correlation Between Lindsell Train and First
Can any of the company-specific risk be diversified away by investing in both Lindsell Train and First 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 First 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 First Class Metals, you can compare the effects of market volatilities on Lindsell Train and First 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 First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindsell Train and First.
Diversification Opportunities for Lindsell Train and First
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lindsell and First is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and First Class Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Class Metals 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 First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Class Metals has no effect on the direction of Lindsell Train i.e., Lindsell Train and First go up and down completely randomly.
Pair Corralation between Lindsell Train and First
Assuming the 90 days trading horizon Lindsell Train Investment is expected to generate 0.55 times more return on investment than First. However, Lindsell Train Investment is 1.83 times less risky than First. It trades about 0.21 of its potential returns per unit of risk. First Class Metals is currently generating about -0.33 per unit of risk. If you would invest 74,700 in Lindsell Train Investment on October 13, 2024 and sell it today you would earn a total of 5,900 from holding Lindsell Train Investment or generate 7.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lindsell Train Investment vs. First Class Metals
Performance |
| Timeline |
| Lindsell Train Investment |
| First Class Metals |
Lindsell Train and First Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lindsell Train and First
The main advantage of trading using opposite Lindsell Train and First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindsell Train position performs unexpectedly, First 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 First will offset losses from the drop in First's long position.| Lindsell Train vs. Gamma Communications PLC | Lindsell Train vs. Telecom Italia SpA | Lindsell Train vs. Cellnex Telecom SA | Lindsell Train vs. Universal Display Corp |
| First vs. Spirent Communications plc | First vs. Pets at Home | First vs. Cairn Homes PLC | First vs. Ecclesiastical Insurance Office |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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