Correlation Between Linamar and Autocanada
Can any of the company-specific risk be diversified away by investing in both Linamar and Autocanada 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 Linamar and Autocanada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Linamar and Autocanada, you can compare the effects of market volatilities on Linamar and Autocanada 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 Linamar with a short position of Autocanada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linamar and Autocanada.
Diversification Opportunities for Linamar and Autocanada
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Linamar and Autocanada is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Linamar and Autocanada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autocanada and Linamar 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 Linamar are associated (or correlated) with Autocanada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autocanada has no effect on the direction of Linamar i.e., Linamar and Autocanada go up and down completely randomly.
Pair Corralation between Linamar and Autocanada
Assuming the 90 days trading horizon Linamar is expected to generate 1.85 times less return on investment than Autocanada. But when comparing it to its historical volatility, Linamar is 1.48 times less risky than Autocanada. It trades about 0.09 of its potential returns per unit of risk. Autocanada is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,731 in Autocanada on October 22, 2024 and sell it today you would earn a total of 61.00 from holding Autocanada or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Linamar vs. Autocanada
Performance |
| Timeline |
| Linamar |
| Autocanada |
Linamar and Autocanada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Linamar and Autocanada
The main advantage of trading using opposite Linamar and Autocanada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linamar position performs unexpectedly, Autocanada 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 Autocanada will offset losses from the drop in Autocanada's long position.| Linamar vs. Martinrea International | Linamar vs. Magna International | Linamar vs. CCL Industries | Linamar vs. Stella Jones |
| Autocanada vs. Martinrea International | Autocanada vs. Linamar | Autocanada vs. NFI Group | Autocanada vs. Element Fleet Management |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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