Correlation Between Linamar and First Trust

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

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

Diversification Opportunities for Linamar and First Trust

-0.79

Correlation Coefficient

Linamar  First Trust

Pay attention - limited upside

The 3 months correlation between Linamar and First is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Linamar and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Indxx has no effect on the direction of Linamar i.e., Linamar and First Trust go up and down completely randomly.

Pair Corralation between Linamar and First Trust

Assuming the 90 days trading horizon Linamar is expected to under-perform the First Trust. In addition to that, Linamar is 1.59 times more volatile than First Trust Indxx. It trades about -0.18 of its total potential returns per unit of risk. First Trust Indxx is currently generating about 0.15 per unit of volatility. If you would invest  1,153  in First Trust Indxx on December 1, 2024 and sell it today you would earn a total of  104.00  from holding First Trust Indxx or generate 9.02% return on investment over 90 days.

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

Linamar  vs.  First Trust Indxx

Linamar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Linamar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

First Trust Indxx

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Linamar and First Trust

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

The idea behind Linamar and First Trust Indxx 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.