Correlation Between Linamar and NFI
Can any of the company-specific risk be diversified away by investing in both Linamar and NFI 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 NFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Linamar and NFI Group, you can compare the effects of market volatilities on Linamar and NFI 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 NFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linamar and NFI.
Diversification Opportunities for Linamar and NFI
Very weak diversification
The 3 months correlation between Linamar and NFI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Linamar and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group 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 NFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFI Group has no effect on the direction of Linamar i.e., Linamar and NFI go up and down completely randomly.
Pair Corralation between Linamar and NFI
Assuming the 90 days trading horizon Linamar is expected to generate 8.29 times less return on investment than NFI. But when comparing it to its historical volatility, Linamar is 1.6 times less risky than NFI. It trades about 0.01 of its potential returns per unit of risk. NFI Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 962.00 in NFI Group on August 24, 2024 and sell it today you would earn a total of 492.00 from holding NFI Group or generate 51.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Linamar vs. NFI Group
Performance |
| Timeline |
| Linamar |
| NFI Group |
Linamar and NFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Linamar and NFI
The main advantage of trading using opposite Linamar and NFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linamar position performs unexpectedly, NFI 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 NFI will offset losses from the drop in NFI's long position.| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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