Correlation Between Linamar and Denso Corp
Can any of the company-specific risk be diversified away by investing in both Linamar and Denso Corp 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 Denso Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Linamar and Denso Corp ADR, you can compare the effects of market volatilities on Linamar and Denso Corp 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 Denso Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linamar and Denso Corp.
Diversification Opportunities for Linamar and Denso Corp
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Linamar and Denso is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Linamar and Denso Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denso Corp ADR 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 Denso Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denso Corp ADR has no effect on the direction of Linamar i.e., Linamar and Denso Corp go up and down completely randomly.
Pair Corralation between Linamar and Denso Corp
Assuming the 90 days horizon Linamar is expected to generate 1.32 times less return on investment than Denso Corp. In addition to that, Linamar is 1.22 times more volatile than Denso Corp ADR. It trades about 0.05 of its total potential returns per unit of risk. Denso Corp ADR is currently generating about 0.09 per unit of volatility. If you would invest 1,528 in Denso Corp ADR on January 25, 2024 and sell it today you would earn a total of 286.00 from holding Denso Corp ADR or generate 18.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Linamar vs. Denso Corp ADR
Performance |
| Timeline |
| Linamar |
| Denso Corp ADR |
Linamar and Denso Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Linamar and Denso Corp
The main advantage of trading using opposite Linamar and Denso Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linamar position performs unexpectedly, Denso Corp 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 Denso Corp will offset losses from the drop in Denso Corp's long position.| Linamar vs. Rivian Automotive | Linamar vs. Nio Class A | Linamar vs. Xpeng Inc | Linamar vs. Mullen Automotive |
| Denso Corp vs. Allison Transmission Holdings | Denso Corp vs. Luminar Technologies | Denso Corp vs. Lear Corporation | Denso Corp vs. BorgWarner |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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