Correlation Between Linamar and BMO Long
Can any of the company-specific risk be diversified away by investing in both Linamar and BMO Long 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 BMO Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Linamar and BMO Long Corporate, you can compare the effects of market volatilities on Linamar and BMO Long 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 BMO Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linamar and BMO Long.
Diversification Opportunities for Linamar and BMO Long
Good diversification
The 3 months correlation between Linamar and BMO is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Linamar and BMO Long Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Long Corporate 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 BMO Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Long Corporate has no effect on the direction of Linamar i.e., Linamar and BMO Long go up and down completely randomly.
Pair Corralation between Linamar and BMO Long
Assuming the 90 days trading horizon Linamar is expected to generate 2.65 times more return on investment than BMO Long. However, Linamar is 2.65 times more volatile than BMO Long Corporate. It trades about 0.11 of its potential returns per unit of risk. BMO Long Corporate is currently generating about 0.17 per unit of risk. If you would invest 5,967 in Linamar on September 12, 2024 and sell it today you would earn a total of 235.00 from holding Linamar or generate 3.94% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Linamar vs. BMO Long Corporate
Performance |
Timeline |
Linamar |
BMO Long Corporate |
Linamar and BMO Long Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Linamar and BMO Long
The main advantage of trading using opposite Linamar and BMO Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linamar position performs unexpectedly, BMO Long 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 BMO Long will offset losses from the drop in BMO Long's long position.Linamar vs. Martinrea International | Linamar vs. Magna International | Linamar vs. CCL Industries | Linamar vs. Stella Jones |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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