Correlation Between Lincoln Electric and LS Starrett

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

Diversification Opportunities for Lincoln Electric and LS Starrett

0.41

Correlation Coefficient

Lincoln Electric  LS Starrett

Very weak diversification

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

Pair Corralation between Lincoln Electric and LS Starrett

If you would invest  20,175  in Lincoln Electric Holdings on September 2, 2024 and sell it today you would earn a total of  1,673  from holding Lincoln Electric Holdings or generate 8.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Lincoln Electric Holdings  vs.  LS Starrett

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.

LS Starrett

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LS Starrett has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, LS Starrett is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lincoln Electric and LS Starrett

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

The idea behind Lincoln Electric Holdings and LS Starrett 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.