Correlation Between Lincoln Electric and 718546AH7

Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and 718546AH7 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 718546AH7 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 PHILLIPS 66 5875, you can compare the effects of market volatilities on Lincoln Electric and 718546AH7 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 718546AH7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and 718546AH7.

Diversification Opportunities for Lincoln Electric and 718546AH7

0.65

Correlation Coefficient

Lincoln Electric  718546AH7

Poor diversification

The 3 months correlation between Lincoln and 718546AH7 is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and PHILLIPS 66 5875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHILLIPS 66 5875 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 718546AH7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHILLIPS 66 5875 has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and 718546AH7 go up and down completely randomly.

Pair Corralation between Lincoln Electric and 718546AH7

Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 1.15 times more return on investment than 718546AH7. However, Lincoln Electric is 1.15 times more volatile than PHILLIPS 66 5875. It trades about 0.02 of its potential returns per unit of risk. PHILLIPS 66 5875 is currently generating about 0.02 per unit of risk. If you would invest  19,246  in Lincoln Electric Holdings on December 5, 2024 and sell it today you would earn a total of  115.00  from holding Lincoln Electric Holdings or generate 0.6% return on investment over 90 days.

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

Lincoln Electric Holdings  vs.  PHILLIPS 66 5875

Lincoln Electric Holdings

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

PHILLIPS 66 5875

Risk-Adjusted Performance

Very Weak

Over the last 90 days PHILLIPS 66 5875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 718546AH7 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lincoln Electric and 718546AH7

The main advantage of trading using opposite Lincoln Electric and 718546AH7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, 718546AH7 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 718546AH7 will offset losses from the drop in 718546AH7's long position.

The idea behind Lincoln Electric Holdings and PHILLIPS 66 5875 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.