Correlation Between Lipocine and Lincoln Electric

Can any of the company-specific risk be diversified away by investing in both Lipocine and Lincoln Electric 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 Lipocine and Lincoln Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lipocine and Lincoln Electric Holdings, you can compare the effects of market volatilities on Lipocine and Lincoln Electric 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 Lipocine with a short position of Lincoln Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lipocine and Lincoln Electric.

Diversification Opportunities for Lipocine and Lincoln Electric

-0.56

Correlation Coefficient

Lipocine  Lincoln Electric

Excellent diversification

The 3 months correlation between Lipocine and Lincoln is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Lincoln Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Electric Holdings and Lipocine 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 Lipocine are associated (or correlated) with Lincoln Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Electric Holdings has no effect on the direction of Lipocine i.e., Lipocine and Lincoln Electric go up and down completely randomly.

Pair Corralation between Lipocine and Lincoln Electric

Given the investment horizon of 90 days Lipocine is expected to under-perform the Lincoln Electric. In addition to that, Lipocine is 2.05 times more volatile than Lincoln Electric Holdings. It trades about -0.11 of its total potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.04 per unit of volatility. If you would invest  18,749  in Lincoln Electric Holdings on December 29, 2024 and sell it today you would earn a total of  737.00  from holding Lincoln Electric Holdings or generate 3.93% return on investment over 90 days.

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

Lipocine  vs.  Lincoln Electric Holdings

Lipocine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lipocine 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Lincoln Electric Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 3 (%) 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 latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lipocine and Lincoln Electric

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

The idea behind Lipocine and Lincoln Electric Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.