Correlation Between Linamar and Stantec

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

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

Diversification Opportunities for Linamar and Stantec

-0.08

Correlation Coefficient

Linamar  Stantec

Good diversification

The 3 months correlation between Linamar and Stantec is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Linamar and Stantec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stantec 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 Stantec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stantec has no effect on the direction of Linamar i.e., Linamar and Stantec go up and down completely randomly.

Pair Corralation between Linamar and Stantec

Assuming the 90 days trading horizon Linamar is expected to generate 4.73 times less return on investment than Stantec. In addition to that, Linamar is 1.27 times more volatile than Stantec. It trades about 0.02 of its total potential returns per unit of risk. Stantec is currently generating about 0.12 per unit of volatility. If you would invest  10,752  in Stantec on September 15, 2024 and sell it today you would earn a total of  1,008  from holding Stantec or generate 9.38% return on investment over 90 days.

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

Linamar  vs.  Stantec

Linamar

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Linamar are ranked lower than 1 (%) 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 newest stock price disarray, may contribute to short-term losses for the investors.

Stantec

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stantec are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Stantec may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Linamar and Stantec

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

The idea behind Linamar and Stantec 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.