Correlation Between Lincoln Electric and UNITEDHEALTH

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

Diversification Opportunities for Lincoln Electric and UNITEDHEALTH

0.44

Correlation Coefficient

Lincoln Electric  UNITEDHEALTH

Very weak diversification

The 3 months correlation between Lincoln and UNITEDHEALTH is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and UNITEDHEALTH GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITEDHEALTH GROUP INC 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 UNITEDHEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITEDHEALTH GROUP INC has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between Lincoln Electric and UNITEDHEALTH

Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 6.74 times more return on investment than UNITEDHEALTH. However, Lincoln Electric is 6.74 times more volatile than UNITEDHEALTH GROUP INC. It trades about 0.04 of its potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about 0.04 per unit of risk. If you would invest  19,013  in Lincoln Electric Holdings on December 26, 2024 and sell it today you would earn a total of  622.00  from holding Lincoln Electric Holdings or generate 3.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Lincoln Electric Holdings  vs.  UNITEDHEALTH GROUP INC

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 2 (%) 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.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UNITEDHEALTH GROUP INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UNITEDHEALTH 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 UNITEDHEALTH

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

The idea behind Lincoln Electric Holdings and UNITEDHEALTH GROUP INC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.