Correlation Between Lincoln Electric and Getty Realty

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

Diversification Opportunities for Lincoln Electric and Getty Realty

0.45

Correlation Coefficient

Lincoln Electric  Getty Realty

Very weak diversification

The 3 months correlation between Lincoln and Getty is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Getty Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Getty Realty 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 Getty Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Getty Realty has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Getty Realty go up and down completely randomly.

Pair Corralation between Lincoln Electric and Getty Realty

Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 1.74 times more return on investment than Getty Realty. However, Lincoln Electric is 1.74 times more volatile than Getty Realty. It trades about 0.04 of its potential returns per unit of risk. Getty Realty is currently generating about 0.06 per unit of risk. If you would invest  18,749  in Lincoln Electric Holdings on December 28, 2024 and sell it today you would earn a total of  737.00  from holding Lincoln Electric Holdings or generate 3.93% return on investment over 90 days.

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

Lincoln Electric Holdings  vs.  Getty Realty

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 3 (%) 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.

Getty Realty

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Getty Realty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Getty Realty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lincoln Electric and Getty Realty

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

The idea behind Lincoln Electric Holdings and Getty Realty 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.