Correlation Between Lincoln Electric and Orchestra BioMed

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

Diversification Opportunities for Lincoln Electric and Orchestra BioMed

0.46

Correlation Coefficient

Lincoln Electric  Orchestra BioMed

Very weak diversification

The 3 months correlation between Lincoln and Orchestra is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Orchestra BioMed Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orchestra BioMed Holdings 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 Orchestra BioMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orchestra BioMed Holdings has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Orchestra BioMed go up and down completely randomly.

Pair Corralation between Lincoln Electric and Orchestra BioMed

Given the investment horizon of 90 days Lincoln Electric is expected to generate 2.03 times less return on investment than Orchestra BioMed. But when comparing it to its historical volatility, Lincoln Electric Holdings is 3.57 times less risky than Orchestra BioMed. It trades about 0.04 of its potential returns per unit of risk. Orchestra BioMed Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  566.00  in Orchestra BioMed Holdings on October 25, 2024 and sell it today you would lose (14.00) from holding Orchestra BioMed Holdings or give up 2.47% of portfolio value over 90 days.

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

Lincoln Electric Holdings  vs.  Orchestra BioMed Holdings

Lincoln Electric Holdings

Risk-Adjusted Performance

3 of 100

Weak

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.

Orchestra BioMed Holdings

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orchestra BioMed Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Orchestra BioMed may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lincoln Electric and Orchestra BioMed

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

The idea behind Lincoln Electric Holdings and Orchestra BioMed Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.