Correlation Between Porsche Automobile and Linamar

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

By analyzing existing cross correlation between Porsche Automobile Holding and Linamar, you can compare the effects of market volatilities on Porsche Automobile 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 Porsche Automobile with a short position of Linamar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Porsche Automobile and Linamar.

Diversification Opportunities for Porsche Automobile and Linamar

0.64

Correlation Coefficient

Porsche Automobile  Linamar

Poor diversification

The 3 months correlation between Porsche and Linamar is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Porsche Automobile Holding and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar and Porsche Automobile 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 Porsche Automobile Holding 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 Porsche Automobile i.e., Porsche Automobile and Linamar go up and down completely randomly.

Pair Corralation between Porsche Automobile and Linamar

Assuming the 90 days horizon Porsche Automobile Holding is expected to under-perform the Linamar. But the pink sheet apears to be less risky and, when comparing its historical volatility, Porsche Automobile Holding is 1.33 times less risky than Linamar. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Linamar is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,741  in Linamar on September 2, 2024 and sell it today you would lose (408.00) from holding Linamar or give up 8.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.98%
Values	Daily Returns

Porsche Automobile Holding  vs.  Linamar

Porsche Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Porsche Automobile Holding 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 technical indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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. Despite nearly stable basic indicators, Linamar is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Porsche Automobile and Linamar

The main advantage of trading using opposite Porsche Automobile and Linamar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porsche Automobile 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 Porsche Automobile Holding 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.

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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.