Correlation Between Open Text and Linamar
Can any of the company-specific risk be diversified away by investing in both Open Text 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 Open Text and Linamar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Open Text Corp and Linamar, you can compare the effects of market volatilities on Open Text 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 Open Text with a short position of Linamar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Open Text and Linamar.
Diversification Opportunities for Open Text and Linamar
Poor diversification
The 3 months correlation between Open and Linamar is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Open Text Corp and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar and Open Text 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 Open Text Corp 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 Open Text i.e., Open Text and Linamar go up and down completely randomly.
Pair Corralation between Open Text and Linamar
Assuming the 90 days trading horizon Open Text Corp is expected to generate 1.18 times more return on investment than Linamar. However, Open Text is 1.18 times more volatile than Linamar. It trades about 0.01 of its potential returns per unit of risk. Linamar is currently generating about -0.06 per unit of risk. If you would invest 4,043 in Open Text Corp on August 24, 2024 and sell it today you would earn a total of 35.00 from holding Open Text Corp or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Open Text Corp vs. Linamar
Performance |
| Timeline |
| Open Text Corp |
| Linamar |
Open Text and Linamar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Open Text and Linamar
The main advantage of trading using opposite Open Text and Linamar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Open Text 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.| Open Text vs. Income Financial Trust | Open Text vs. Osisko Metals | Open Text vs. US Financial 15 | Open Text vs. Arizona Metals Corp |
| 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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