Correlation Between Lincoln Electric and International Media

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

Diversification Opportunities for Lincoln Electric and International Media

-0.19

Correlation Coefficient

Lincoln Electric  International Media

Good diversification

The 3 months correlation between Lincoln and International is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and International Media Acquisitio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Media 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 International Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Media has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and International Media go up and down completely randomly.

Pair Corralation between Lincoln Electric and International Media

Given the investment horizon of 90 days Lincoln Electric is expected to generate 112.0 times less return on investment than International Media. But when comparing it to its historical volatility, Lincoln Electric Holdings is 43.02 times less risky than International Media. It trades about 0.03 of its potential returns per unit of risk. International Media Acquisition is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9.50  in International Media Acquisition on October 6, 2024 and sell it today you would lose (3.50) from holding International Media Acquisition or give up 36.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	43.03%
Values	Daily Returns

Lincoln Electric Holdings  vs.  International Media Acquisitio

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.

International Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lincoln Electric and International Media

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

The idea behind Lincoln Electric Holdings and International Media Acquisition 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.