Correlation Between Inter Parfums and Lincoln Electric

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

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

Diversification Opportunities for Inter Parfums and Lincoln Electric

0.81

Correlation Coefficient

Inter Parfums  Lincoln Electric

Very poor diversification

The 3 months correlation between Inter and Lincoln is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Inter Parfums 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 Inter Parfums 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 Inter Parfums 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 Inter Parfums i.e., Inter Parfums and Lincoln Electric go up and down completely randomly.

Pair Corralation between Inter Parfums and Lincoln Electric

Given the investment horizon of 90 days Inter Parfums is expected to generate 0.92 times more return on investment than Lincoln Electric. However, Inter Parfums is 1.09 times less risky than Lincoln Electric. It trades about 0.18 of its potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.16 per unit of risk. If you would invest  11,505  in Inter Parfums on September 12, 2024 and sell it today you would earn a total of  2,338  from holding Inter Parfums or generate 20.32% return on investment over 90 days.

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

Inter Parfums  vs.  Lincoln Electric Holdings

Inter Parfums

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Parfums are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Inter Parfums reported solid returns over the last few months and may actually be approaching a breakup point.

Lincoln Electric Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Lincoln Electric displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inter Parfums and Lincoln Electric

The main advantage of trading using opposite Inter Parfums and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inter Parfums 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 Inter Parfums 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.