Correlation Between Linamar and Rubicon Organics

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

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

Diversification Opportunities for Linamar and Rubicon Organics

0.16

Correlation Coefficient

Linamar  Rubicon Organics

Average diversification

The 3 months correlation between Linamar and Rubicon is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Linamar and Rubicon Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubicon Organics 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 Rubicon Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubicon Organics has no effect on the direction of Linamar i.e., Linamar and Rubicon Organics go up and down completely randomly.

Pair Corralation between Linamar and Rubicon Organics

Assuming the 90 days trading horizon Linamar is expected to generate 0.35 times more return on investment than Rubicon Organics. However, Linamar is 2.88 times less risky than Rubicon Organics. It trades about 0.01 of its potential returns per unit of risk. Rubicon Organics is currently generating about -0.1 per unit of risk. If you would invest  6,140  in Linamar on September 3, 2024 and sell it today you would earn a total of  7.00  from holding Linamar or generate 0.11% return on investment over 90 days.

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

Linamar  vs.  Rubicon Organics

Linamar

Risk-Adjusted Performance

0 of 100

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 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.

Rubicon Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rubicon Organics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Linamar and Rubicon Organics

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

The idea behind Linamar and Rubicon Organics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.