Correlation Between Lindsell Train and Extra Space

Can any of the company-specific risk be diversified away by investing in both Lindsell Train and Extra Space 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 Extra Space 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 Extra Space Storage, you can compare the effects of market volatilities on Lindsell Train and Extra Space 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 Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindsell Train and Extra Space.

Diversification Opportunities for Lindsell Train and Extra Space

0.54

Correlation Coefficient

Lindsell Train  Extra Space

Very weak diversification

The 3 months correlation between Lindsell and Extra is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage 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 Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of Lindsell Train i.e., Lindsell Train and Extra Space go up and down completely randomly.

Pair Corralation between Lindsell Train and Extra Space

Assuming the 90 days trading horizon Lindsell Train Investment is expected to under-perform the Extra Space. In addition to that, Lindsell Train is 1.1 times more volatile than Extra Space Storage. It trades about -0.07 of its total potential returns per unit of risk. Extra Space Storage is currently generating about -0.01 per unit of volatility. If you would invest  17,350  in Extra Space Storage on September 4, 2024 and sell it today you would lose (287.00) from holding Extra Space Storage or give up 1.65% of portfolio value over 90 days.

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

Lindsell Train Investment  vs.  Extra Space Storage

Lindsell Train Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lindsell Train Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Extra Space Storage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lindsell Train and Extra Space

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

The idea behind Lindsell Train Investment and Extra Space Storage 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.