Correlation Between Lincoln Electric and Enviri

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

Diversification Opportunities for Lincoln Electric and Enviri

-0.48

Correlation Coefficient

Lincoln Electric  Enviri

Very good diversification

The 3 months correlation between Lincoln and Enviri is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Enviri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enviri 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 Enviri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enviri has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Enviri go up and down completely randomly.

Pair Corralation between Lincoln Electric and Enviri

Given the investment horizon of 90 days Lincoln Electric Holdings is expected to under-perform the Enviri. But the stock apears to be less risky and, when comparing its historical volatility, Lincoln Electric Holdings is 2.22 times less risky than Enviri. The stock trades about -0.56 of its potential returns per unit of risk. The Enviri is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  762.00  in Enviri on October 12, 2024 and sell it today you would earn a total of  81.00  from holding Enviri or generate 10.63% return on investment over 90 days.

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

Lincoln Electric Holdings  vs.  Enviri

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.

Enviri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enviri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Lincoln Electric and Enviri

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

The idea behind Lincoln Electric Holdings and Enviri 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.