Correlation Between Lincoln Electric and PEPSICO

Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and PEPSICO 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 PEPSICO 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 PEPSICO INC 35, you can compare the effects of market volatilities on Lincoln Electric and PEPSICO 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 PEPSICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and PEPSICO.

Diversification Opportunities for Lincoln Electric and PEPSICO

0.35

Correlation Coefficient

Lincoln Electric  PEPSICO

Weak diversification

The 3 months correlation between Lincoln and PEPSICO is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and PEPSICO INC 35 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 35 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 PEPSICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPSICO INC 35 has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and PEPSICO go up and down completely randomly.

Pair Corralation between Lincoln Electric and PEPSICO

Given the investment horizon of 90 days Lincoln Electric Holdings is expected to under-perform the PEPSICO. In addition to that, Lincoln Electric is 1.54 times more volatile than PEPSICO INC 35. It trades about -0.61 of its total potential returns per unit of risk. PEPSICO INC 35 is currently generating about -0.21 per unit of volatility. If you would invest  9,936  in PEPSICO INC 35 on September 26, 2024 and sell it today you would lose (318.00) from holding PEPSICO INC 35 or give up 3.2% of portfolio value over 90 days.

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

Lincoln Electric Holdings  vs.  PEPSICO INC 35

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.

PEPSICO INC 35

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEPSICO INC 35 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PEPSICO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lincoln Electric and PEPSICO

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

The idea behind Lincoln Electric Holdings and PEPSICO INC 35 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.