Correlation Between First Trust and Linamar
Can any of the company-specific risk be diversified away by investing in both First Trust and Linamar 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 First Trust and Linamar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Indxx and Linamar, you can compare the effects of market volatilities on First Trust and Linamar 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 First Trust with a short position of Linamar. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Linamar.
Diversification Opportunities for First Trust and Linamar
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Linamar is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar and First Trust 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 First Trust Indxx are associated (or correlated) with Linamar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linamar has no effect on the direction of First Trust i.e., First Trust and Linamar go up and down completely randomly.
Pair Corralation between First Trust and Linamar
Assuming the 90 days trading horizon First Trust Indxx is expected to generate 0.37 times more return on investment than Linamar. However, First Trust Indxx is 2.7 times less risky than Linamar. It trades about 0.11 of its potential returns per unit of risk. Linamar is currently generating about 0.01 per unit of risk. If you would invest 822.00 in First Trust Indxx on September 3, 2024 and sell it today you would earn a total of 331.00 from holding First Trust Indxx or generate 40.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
First Trust Indxx vs. Linamar
Performance |
| Timeline |
| First Trust Indxx |
| Linamar |
First Trust and Linamar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Linamar
The main advantage of trading using opposite First Trust and Linamar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Linamar 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 Linamar will offset losses from the drop in Linamar's long position.| First Trust vs. International Zeolite Corp | First Trust vs. European Residential Real | First Trust vs. Financial 15 Split | First Trust vs. Rubicon Organics |
| Linamar vs. Martinrea International | Linamar vs. Magna International | Linamar vs. CCL Industries | Linamar vs. Stella Jones |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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