In this work, we present the analysis of a Linear Variable Differential Transformer (LVDT), which movable core is an encapsulated ferrofluid. A ferrofluid is a ferromagnetic nanoparticles composed fluid, which physical properties, including geometry, vary when it is under the influence magnetic field. Our proposed analysis is on the performance of a ferrofluid core LVDT, based in the fact that as the ferrofluid core moves between the magnetic fields generated in the coils of the LVDT, the core geometry varies. A sensibility and linearity comparison between a conventional LVDT and the ferrofluid core LVDT is presented, along with three different quantities of encapsulated ferrofluid inside the ferrofluid cores. The results of this work will be further used in order to obtain industrial grade sensors and actuators.