Correlation Between Lincoln Electric and ATRenew

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

Diversification Opportunities for Lincoln Electric and ATRenew

0.41

Correlation Coefficient

Lincoln Electric  ATRenew

Very weak diversification

The 3 months correlation between Lincoln and ATRenew is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and ATRenew Inc DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATRenew Inc DRC 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 ATRenew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATRenew Inc DRC has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and ATRenew go up and down completely randomly.

Pair Corralation between Lincoln Electric and ATRenew

Given the investment horizon of 90 days Lincoln Electric is expected to generate 2.25 times less return on investment than ATRenew. But when comparing it to its historical volatility, Lincoln Electric Holdings is 2.35 times less risky than ATRenew. It trades about 0.14 of its potential returns per unit of risk. ATRenew Inc DRC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  238.00  in ATRenew Inc DRC on September 2, 2024 and sell it today you would earn a total of  91.00  from holding ATRenew Inc DRC or generate 38.24% return on investment over 90 days.

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

Lincoln Electric Holdings  vs.  ATRenew Inc DRC

Lincoln Electric Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Lincoln Electric displayed solid returns over the last few months and may actually be approaching a breakup point.

ATRenew Inc DRC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATRenew Inc DRC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ATRenew exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lincoln Electric and ATRenew

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

The idea behind Lincoln Electric Holdings and ATRenew Inc DRC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.