Correlation Between Lincoln Electric and BranchOut Food

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

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

Diversification Opportunities for Lincoln Electric and BranchOut Food

0.23

Correlation Coefficient

Lincoln Electric  BranchOut Food

Modest diversification

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

Pair Corralation between Lincoln Electric and BranchOut Food

Given the investment horizon of 90 days Lincoln Electric is expected to generate 6.36 times less return on investment than BranchOut Food. But when comparing it to its historical volatility, Lincoln Electric Holdings is 2.19 times less risky than BranchOut Food. It trades about 0.03 of its potential returns per unit of risk. BranchOut Food Common is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  161.00  in BranchOut Food Common on December 21, 2024 and sell it today you would earn a total of  34.00  from holding BranchOut Food Common or generate 21.12% return on investment over 90 days.

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

Lincoln Electric Holdings  vs.  BranchOut Food Common

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.

BranchOut Food Common

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BranchOut Food Common are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, BranchOut Food reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lincoln Electric and BranchOut Food

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

The idea behind Lincoln Electric Holdings and BranchOut Food Common 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.