Correlation Between Boeing and Lincoln Electric

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

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

Diversification Opportunities for Boeing and Lincoln Electric

0.34

Correlation Coefficient

Boeing  Lincoln Electric

Weak diversification

The 3 months correlation between Boeing and Lincoln is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing 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 Boeing 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 The Boeing 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 Boeing i.e., Boeing and Lincoln Electric go up and down completely randomly.

Pair Corralation between Boeing and Lincoln Electric

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the Lincoln Electric. In addition to that, Boeing is 1.07 times more volatile than Lincoln Electric Holdings. It trades about 0.0 of its total potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.02 per unit of volatility. If you would invest  18,749  in Lincoln Electric Holdings on December 28, 2024 and sell it today you would earn a total of  280.00  from holding Lincoln Electric Holdings or generate 1.49% return on investment over 90 days.

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

The Boeing  vs.  Lincoln Electric Holdings

Boeing

Risk-Adjusted Performance

Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Boeing is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lincoln Electric Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 1 (%) 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 Boeing and Lincoln Electric

The main advantage of trading using opposite Boeing and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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 The Boeing 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.