Correlation Between Lincoln Electric and Kenvue

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

Diversification Opportunities for Lincoln Electric and Kenvue

0.38

Correlation Coefficient

Lincoln Electric  Kenvue

Weak diversification

The 3 months correlation between Lincoln and Kenvue is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Kenvue Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenvue Inc 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 Kenvue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenvue Inc has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Kenvue go up and down completely randomly.

Pair Corralation between Lincoln Electric and Kenvue

Given the investment horizon of 90 days Lincoln Electric is expected to generate 2.45 times less return on investment than Kenvue. In addition to that, Lincoln Electric is 1.38 times more volatile than Kenvue Inc. It trades about 0.03 of its total potential returns per unit of risk. Kenvue Inc is currently generating about 0.11 per unit of volatility. If you would invest  2,138  in Kenvue Inc on December 21, 2024 and sell it today you would earn a total of  201.00  from holding Kenvue Inc or generate 9.4% 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.  Kenvue Inc

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.

Kenvue Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kenvue Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Kenvue may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lincoln Electric and Kenvue

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

The idea behind Lincoln Electric Holdings and Kenvue Inc 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.