Correlation Between Addus HomeCare and Lincoln Electric

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

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

Diversification Opportunities for Addus HomeCare and Lincoln Electric

-0.23

Correlation Coefficient

Addus HomeCare  Lincoln Electric

Very good diversification

The 3 months correlation between Addus and Lincoln is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Lincoln Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Electric Holdings and Addus HomeCare 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 Addus HomeCare are associated (or correlated) with Lincoln Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Electric Holdings has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Lincoln Electric go up and down completely randomly.

Pair Corralation between Addus HomeCare and Lincoln Electric

Given the investment horizon of 90 days Addus HomeCare is expected to under-perform the Lincoln Electric. In addition to that, Addus HomeCare is 1.04 times more volatile than Lincoln Electric Holdings. It trades about -0.27 of its total potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.03 per unit of volatility. If you would invest  18,913  in Lincoln Electric Holdings on December 19, 2024 and sell it today you would earn a total of  525.00  from holding Lincoln Electric Holdings or generate 2.78% return on investment over 90 days.

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

Addus HomeCare  vs.  Lincoln Electric Holdings

Addus HomeCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Addus HomeCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lincoln Electric Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Lincoln Electric is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Addus HomeCare and Lincoln Electric

The main advantage of trading using opposite Addus HomeCare and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, Lincoln Electric 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 Lincoln Electric will offset losses from the drop in Lincoln Electric's long position.

The idea behind Addus HomeCare and Lincoln Electric Holdings 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.