Correlation Between Lincoln Electric and Delek Drilling

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

Diversification Opportunities for Lincoln Electric and Delek Drilling

-0.15

Correlation Coefficient

Lincoln Electric  Delek Drilling

Good diversification

The 3 months correlation between Lincoln and Delek is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Delek Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Drilling 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 Delek Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Drilling has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Delek Drilling go up and down completely randomly.

Pair Corralation between Lincoln Electric and Delek Drilling

Given the investment horizon of 90 days Lincoln Electric is expected to generate 1.83 times less return on investment than Delek Drilling. But when comparing it to its historical volatility, Lincoln Electric Holdings is 1.1 times less risky than Delek Drilling. It trades about 0.19 of its potential returns per unit of risk. Delek Drilling is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  327.00  in Delek Drilling on October 25, 2024 and sell it today you would earn a total of  34.00  from holding Delek Drilling or generate 10.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Lincoln Electric Holdings  vs.  Delek Drilling

Lincoln Electric Holdings

Risk-Adjusted Performance

2 of 100

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.

Delek Drilling

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lincoln Electric and Delek Drilling

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

The idea behind Lincoln Electric Holdings and Delek Drilling 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.