Correlation Between TRX Gold and Linamar
Can any of the company-specific risk be diversified away by investing in both TRX Gold 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 TRX Gold and Linamar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TRX Gold Corp and Linamar, you can compare the effects of market volatilities on TRX Gold 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 TRX Gold with a short position of Linamar. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRX Gold and Linamar.
Diversification Opportunities for TRX Gold and Linamar
Very good diversification
The 3 months correlation between TRX and Linamar is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding TRX Gold Corp and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar and TRX Gold 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 TRX Gold 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 TRX Gold i.e., TRX Gold and Linamar go up and down completely randomly.
Pair Corralation between TRX Gold and Linamar
Assuming the 90 days trading horizon TRX Gold Corp is expected to under-perform the Linamar. But the stock apears to be less risky and, when comparing its historical volatility, TRX Gold Corp is 1.32 times less risky than Linamar. The stock trades about -0.1 of its potential returns per unit of risk. The Linamar is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 5,607 in Linamar on September 4, 2024 and sell it today you would earn a total of 636.00 from holding Linamar or generate 11.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
TRX Gold Corp vs. Linamar
Performance |
| Timeline |
| TRX Gold Corp |
| Linamar |
TRX Gold and Linamar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRX Gold and Linamar
The main advantage of trading using opposite TRX Gold and Linamar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRX Gold 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.The idea behind TRX Gold Corp and Linamar pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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