Correlation Between Sligro Food and Lincoln Electric

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

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

Diversification Opportunities for Sligro Food and Lincoln Electric

-0.49

Correlation Coefficient

Sligro Food  Lincoln Electric

Very good diversification

The 3 months correlation between Sligro and Lincoln is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sligro Food Group 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 Sligro Food 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 Sligro Food Group 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 Sligro Food i.e., Sligro Food and Lincoln Electric go up and down completely randomly.

Pair Corralation between Sligro Food and Lincoln Electric

Assuming the 90 days horizon Sligro Food Group is expected to under-perform the Lincoln Electric. In addition to that, Sligro Food is 1.81 times more volatile than Lincoln Electric Holdings. It trades about -0.21 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  21,053  in Lincoln Electric Holdings on September 14, 2024 and sell it today you would lose (290.00) from holding Lincoln Electric Holdings or give up 1.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Sligro Food Group  vs.  Lincoln Electric Holdings

Sligro Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sligro Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Lincoln Electric Holdings

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Lincoln Electric displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sligro Food and Lincoln Electric

The main advantage of trading using opposite Sligro Food and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sligro Food 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 Sligro Food Group 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 Stocks Directory module to find actively traded stocks across global markets.