Correlation Between Lindsell Train and Camellia Plc

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

Diversification Opportunities for Lindsell Train and Camellia Plc

-0.3

Correlation Coefficient

Lindsell Train  Camellia Plc

Very good diversification

The 3 months correlation between Lindsell and Camellia is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and Camellia Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camellia Plc 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 Camellia Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camellia Plc has no effect on the direction of Lindsell Train i.e., Lindsell Train and Camellia Plc go up and down completely randomly.

Pair Corralation between Lindsell Train and Camellia Plc

Assuming the 90 days trading horizon Lindsell Train Investment is expected to under-perform the Camellia Plc. But the stock apears to be less risky and, when comparing its historical volatility, Lindsell Train Investment is 1.18 times less risky than Camellia Plc. The stock trades about -0.03 of its potential returns per unit of risk. The Camellia Plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  437,000  in Camellia Plc on September 12, 2024 and sell it today you would earn a total of  59,000  from holding Camellia Plc or generate 13.5% return on investment over 90 days.

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

Lindsell Train Investment  vs.  Camellia Plc

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 rather sound technical and fundamental indicators, Lindsell Train is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Camellia Plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Camellia Plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Camellia Plc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lindsell Train and Camellia Plc

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

The idea behind Lindsell Train Investment and Camellia Plc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.