Correlation Between Lincoln Electric and Loews Corp

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

Diversification Opportunities for Lincoln Electric and Loews Corp

0.06

Correlation Coefficient

Lincoln Electric  Loews Corp

Significant diversification

The 3 months correlation between Lincoln and Loews is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp 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 Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Loews Corp go up and down completely randomly.

Pair Corralation between Lincoln Electric and Loews Corp

Given the investment horizon of 90 days Lincoln Electric is expected to generate 3.48 times less return on investment than Loews Corp. In addition to that, Lincoln Electric is 1.75 times more volatile than Loews Corp. It trades about 0.02 of its total potential returns per unit of risk. Loews Corp is currently generating about 0.1 per unit of volatility. If you would invest  8,160  in Loews Corp on December 19, 2024 and sell it today you would earn a total of  534.00  from holding Loews Corp or generate 6.54% return on investment over 90 days.

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

Lincoln Electric Holdings  vs.  Loews Corp

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 1 (%) 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.

Loews Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Loews Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lincoln Electric and Loews Corp

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

The idea behind Lincoln Electric Holdings and Loews Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.