Correlation Between Lincoln Electric and United Microelectronics

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

Diversification Opportunities for Lincoln Electric and United Microelectronics

-0.37

Correlation Coefficient

Lincoln Electric  United Microelectronics

Very good diversification

The 3 months correlation between Lincoln and United is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics 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 United Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Microelectronics has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and United Microelectronics go up and down completely randomly.

Pair Corralation between Lincoln Electric and United Microelectronics

Given the investment horizon of 90 days Lincoln Electric Holdings is expected to under-perform the United Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Lincoln Electric Holdings is 1.11 times less risky than United Microelectronics. The stock trades about -0.04 of its potential returns per unit of risk. The United Microelectronics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  763.00  in United Microelectronics on October 7, 2024 and sell it today you would lose (106.00) from holding United Microelectronics or give up 13.89% of portfolio value over 90 days.

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

Lincoln Electric Holdings  vs.  United Microelectronics

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.

United Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lincoln Electric and United Microelectronics

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

The idea behind Lincoln Electric Holdings and United Microelectronics 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 CEOs Directory module to screen CEOs from public companies around the world.