Correlation Between Lincoln Electric and Social Media

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

Diversification Opportunities for Lincoln Electric and Social Media

0.0

Correlation Coefficient

Lincoln Electric  Social Media

Pay attention - limited upside

The 3 months correlation between Lincoln and Social is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Social Media Venture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Social Media Venture 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 Social Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Social Media Venture has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Social Media go up and down completely randomly.

Pair Corralation between Lincoln Electric and Social Media

If you would invest (100.00) in Social Media Venture on October 11, 2024 and sell it today you would earn a total of  100.00  from holding Social Media Venture or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lincoln Electric Holdings  vs.  Social Media Venture

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.

Social Media Venture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Social Media Venture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Social Media is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Lincoln Electric and Social Media

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

The idea behind Lincoln Electric Holdings and Social Media Venture 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.