Correlation Between Lincoln Electric and Sealed Air

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

Diversification Opportunities for Lincoln Electric and Sealed Air

0.1

Correlation Coefficient

Lincoln Electric  Sealed Air

Average diversification

The 3 months correlation between Lincoln and Sealed is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Sealed Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air 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 Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Sealed Air go up and down completely randomly.

Pair Corralation between Lincoln Electric and Sealed Air

Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 1.14 times more return on investment than Sealed Air. However, Lincoln Electric is 1.14 times more volatile than Sealed Air. It trades about 0.02 of its potential returns per unit of risk. Sealed Air is currently generating about -0.11 per unit of risk. If you would invest  18,880  in Lincoln Electric Holdings on December 21, 2024 and sell it today you would earn a total of  288.00  from holding Lincoln Electric Holdings or generate 1.53% 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.  Sealed Air

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.

Sealed Air

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lincoln Electric and Sealed Air

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

The idea behind Lincoln Electric Holdings and Sealed Air 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 Transaction History module to view history of all your transactions and understand their impact on performance.