Correlation Between LS Starrett and Timken

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

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

Diversification Opportunities for LS Starrett and Timken

0.0

Correlation Coefficient

LS Starrett  Timken

Pay attention - limited upside

The 3 months correlation between SCX and Timken is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LS Starrett and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company and LS Starrett 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 LS Starrett are associated (or correlated) with Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of LS Starrett i.e., LS Starrett and Timken go up and down completely randomly.

Pair Corralation between LS Starrett and Timken

If you would invest  7,712  in Timken Company on November 28, 2024 and sell it today you would earn a total of  263.00  from holding Timken Company or generate 3.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

LS Starrett  vs.  Timken Company

LS Starrett

Risk-Adjusted Performance

Very Weak

Over the last 90 days LS Starrett has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, LS Starrett is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Timken Company

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Timken Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with LS Starrett and Timken

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

The idea behind LS Starrett and Timken Company 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.