Correlation Between Lindsell Train and United Utilities
Can any of the company-specific risk be diversified away by investing in both Lindsell Train and United Utilities 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 United Utilities 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 United Utilities Group, you can compare the effects of market volatilities on Lindsell Train and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindsell Train and United Utilities.
Diversification Opportunities for Lindsell Train and United Utilities
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lindsell and United is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Lindsell Train i.e., Lindsell Train and United Utilities go up and down completely randomly.
Pair Corralation between Lindsell Train and United Utilities
Assuming the 90 days trading horizon Lindsell Train Investment is expected to under-perform the United Utilities. In addition to that, Lindsell Train is 1.07 times more volatile than United Utilities Group. It trades about -0.05 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.03 per unit of volatility. If you would invest 99,119 in United Utilities Group on August 31, 2024 and sell it today you would earn a total of 13,831 from holding United Utilities Group or generate 13.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lindsell Train Investment vs. United Utilities Group
Performance |
| Timeline |
| Lindsell Train Investment |
| United Utilities |
Lindsell Train and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lindsell Train and United Utilities
The main advantage of trading using opposite Lindsell Train and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindsell Train position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.| Lindsell Train vs. Ecofin Global Utilities | Lindsell Train vs. AMG Advanced Metallurgical | Lindsell Train vs. Wheaton Precious Metals | Lindsell Train vs. Sligro Food Group |
| United Utilities vs. MyHealthChecked Plc | United Utilities vs. PureTech Health plc | United Utilities vs. Abingdon Health Plc | United Utilities vs. Home Depot |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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