Correlation Between Space Communication and Lincoln Electric

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

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

Diversification Opportunities for Space Communication and Lincoln Electric

0.0

Correlation Coefficient

Space Communication  Lincoln Electric

Pay attention - limited upside

The 3 months correlation between Space and Lincoln is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Space Communication 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 Space Communication 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 Space Communication 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 Space Communication i.e., Space Communication and Lincoln Electric go up and down completely randomly.

Pair Corralation between Space Communication and Lincoln Electric

If you would invest  17,813  in Lincoln Electric Holdings on September 13, 2024 and sell it today you would earn a total of  3,028  from holding Lincoln Electric Holdings or generate 17.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Space Communication  vs.  Lincoln Electric Holdings

Space Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Space Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Space Communication is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Lincoln Electric Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 11 (%) 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 Space Communication and Lincoln Electric

The main advantage of trading using opposite Space Communication and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Space Communication 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 Space Communication 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.