Correlation Between Standard and Linamar
Can any of the company-specific risk be diversified away by investing in both Standard 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 Standard and Linamar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Motor Products and Linamar, you can compare the effects of market volatilities on Standard 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 Standard with a short position of Linamar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard and Linamar.
Diversification Opportunities for Standard and Linamar
Very weak diversification
The 3 months correlation between Standard and Linamar is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Standard Motor Products and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar and Standard 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 Standard Motor Products 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 Standard i.e., Standard and Linamar go up and down completely randomly.
Pair Corralation between Standard and Linamar
Considering the 90-day investment horizon Standard is expected to generate 2.12 times less return on investment than Linamar. But when comparing it to its historical volatility, Standard Motor Products is 1.37 times less risky than Linamar. It trades about 0.08 of its potential returns per unit of risk. Linamar is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,926 in Linamar on November 2, 2024 and sell it today you would earn a total of 149.00 from holding Linamar or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Standard Motor Products vs. Linamar
Performance |
| Timeline |
| Standard Motor Products |
| Linamar |
Standard and Linamar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard and Linamar
The main advantage of trading using opposite Standard and Linamar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard 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.| Standard vs. Dorman Products | Standard vs. Motorcar Parts of | Standard vs. Douglas Dynamics | Standard vs. Stoneridge |
| Linamar vs. Dorman Products | Linamar vs. Standard Motor Products | Linamar vs. Motorcar Parts of | Linamar vs. Douglas Dynamics |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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