Correlation Between Lincoln Electric and Cheer Holding

Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Cheer Holding 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 Cheer Holding 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 Cheer Holding, you can compare the effects of market volatilities on Lincoln Electric and Cheer Holding 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 Cheer Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Cheer Holding.

Diversification Opportunities for Lincoln Electric and Cheer Holding

-0.37

Correlation Coefficient

Lincoln Electric  Cheer Holding

Very good diversification

The 3 months correlation between Lincoln and Cheer is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Cheer Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheer Holding 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 Cheer Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheer Holding has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Cheer Holding go up and down completely randomly.

Pair Corralation between Lincoln Electric and Cheer Holding

Given the investment horizon of 90 days Lincoln Electric is expected to generate 1.46 times less return on investment than Cheer Holding. But when comparing it to its historical volatility, Lincoln Electric Holdings is 1.5 times less risky than Cheer Holding. It trades about 0.02 of its potential returns per unit of risk. Cheer Holding is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  260.00  in Cheer Holding on September 29, 2024 and sell it today you would earn a total of  8.00  from holding Cheer Holding or generate 3.08% return on investment over 90 days.

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

Lincoln Electric Holdings  vs.  Cheer Holding

Lincoln Electric Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lincoln Electric Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Cheer Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheer Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Cheer Holding is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Lincoln Electric and Cheer Holding

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

The idea behind Lincoln Electric Holdings and Cheer Holding 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..