Correlation Between Linamar and CCL Industries

Can any of the company-specific risk be diversified away by investing in both Linamar and CCL Industries 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 CCL Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Linamar and CCL Industries, you can compare the effects of market volatilities on Linamar and CCL Industries 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 CCL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linamar and CCL Industries.

Diversification Opportunities for Linamar and CCL Industries

-0.03

Correlation Coefficient

Linamar  CCL Industries

Good diversification

The 3 months correlation between Linamar and CCL is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Linamar and CCL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCL Industries 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 CCL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCL Industries has no effect on the direction of Linamar i.e., Linamar and CCL Industries go up and down completely randomly.

Pair Corralation between Linamar and CCL Industries

Assuming the 90 days trading horizon Linamar is expected to generate 1.4 times more return on investment than CCL Industries. However, Linamar is 1.4 times more volatile than CCL Industries. It trades about 0.05 of its potential returns per unit of risk. CCL Industries is currently generating about -0.1 per unit of risk. If you would invest  5,960  in Linamar on September 12, 2024 and sell it today you would earn a total of  242.00  from holding Linamar or generate 4.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Linamar  vs.  CCL Industries

Linamar

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Linamar are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Linamar is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CCL Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CCL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Linamar and CCL Industries

The main advantage of trading using opposite Linamar and CCL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linamar position performs unexpectedly, CCL Industries 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 CCL Industries will offset losses from the drop in CCL Industries' long position.

The idea behind Linamar and CCL Industries 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.