Correlation Between Logan Ridge and Lincoln Electric

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

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

Diversification Opportunities for Logan Ridge and Lincoln Electric

0.76

Correlation Coefficient

Logan Ridge  Lincoln Electric

Poor diversification

The 3 months correlation between Logan and Lincoln is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Logan Ridge Finance 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 Logan Ridge 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 Logan Ridge Finance 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 Logan Ridge i.e., Logan Ridge and Lincoln Electric go up and down completely randomly.

Pair Corralation between Logan Ridge and Lincoln Electric

Given the investment horizon of 90 days Logan Ridge is expected to generate 1.54 times less return on investment than Lincoln Electric. But when comparing it to its historical volatility, Logan Ridge Finance is 1.46 times less risky than Lincoln Electric. It trades about 0.04 of its potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  14,103  in Lincoln Electric Holdings on September 20, 2024 and sell it today you would earn a total of  5,109  from holding Lincoln Electric Holdings or generate 36.23% return on investment over 90 days.

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

Logan Ridge Finance  vs.  Lincoln Electric Holdings

Logan Ridge Finance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Logan Ridge Finance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Logan Ridge is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Lincoln Electric Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Lincoln Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Logan Ridge and Lincoln Electric

The main advantage of trading using opposite Logan Ridge and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Logan Ridge 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 Logan Ridge Finance 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.