Correlation Between Telus Corp and Linamar

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

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

Diversification Opportunities for Telus Corp and Linamar

0.76

Correlation Coefficient

Telus Corp  Linamar

Poor diversification

The 3 months correlation between Telus and Linamar is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Telus Corp and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar and Telus Corp 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 Telus Corp 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 Telus Corp i.e., Telus Corp and Linamar go up and down completely randomly.

Pair Corralation between Telus Corp and Linamar

Given the investment horizon of 90 days Telus Corp is expected to generate 0.65 times more return on investment than Linamar. However, Telus Corp is 1.54 times less risky than Linamar. It trades about 0.22 of its potential returns per unit of risk. Linamar is currently generating about 0.11 per unit of risk. If you would invest  1,948  in Telus Corp on October 24, 2024 and sell it today you would earn a total of  70.00  from holding Telus Corp or generate 3.59% return on investment over 90 days.

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

Telus Corp  vs.  Linamar

Telus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Telus Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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. 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.

Pair Trading with Telus Corp and Linamar

The main advantage of trading using opposite Telus Corp and Linamar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telus Corp 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 Telus Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.