Correlation Between First Asset and Linamar

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

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

Diversification Opportunities for First Asset and Linamar

0.8

Correlation Coefficient

First Asset  Linamar

Very poor diversification

The 3 months correlation between First and Linamar is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Morningstar and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar and First Asset 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 First Asset Morningstar 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 First Asset i.e., First Asset and Linamar go up and down completely randomly.

Pair Corralation between First Asset and Linamar

Assuming the 90 days trading horizon First Asset is expected to generate 3.25 times less return on investment than Linamar. But when comparing it to its historical volatility, First Asset Morningstar is 4.8 times less risky than Linamar. It trades about 0.79 of its potential returns per unit of risk. Linamar is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest  4,815  in Linamar on February 16, 2025 and sell it today you would earn a total of  1,443  from holding Linamar or generate 29.97% return on investment over 90 days.

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

First Asset Morningstar  vs.  Linamar

First Asset Morningstar

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Asset Morningstar are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, First Asset 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linamar are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Linamar displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Asset and Linamar

The main advantage of trading using opposite First Asset and Linamar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Asset 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 First Asset Morningstar 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..