Correlation Between Eastern and Lincoln Electric
Can any of the company-specific risk be diversified away by investing in both Eastern 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 Eastern and Lincoln Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Co and Lincoln Electric Holdings, you can compare the effects of market volatilities on Eastern 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 Eastern with a short position of Lincoln Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Lincoln Electric.
Diversification Opportunities for Eastern and Lincoln Electric
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eastern and Lincoln is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co 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 Eastern 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 Eastern Co 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 Eastern i.e., Eastern and Lincoln Electric go up and down completely randomly.
Pair Corralation between Eastern and Lincoln Electric
Considering the 90-day investment horizon Eastern Co is expected to under-perform the Lincoln Electric. In addition to that, Eastern is 1.18 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 0.15 per unit of volatility. If you would invest 19,376 in Lincoln Electric Holdings on August 24, 2024 and sell it today you would earn a total of 1,475 from holding Lincoln Electric Holdings or generate 7.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Co vs. Lincoln Electric Holdings
Performance |
| Timeline |
| Eastern |
| Lincoln Electric Holdings |
Eastern and Lincoln Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern and Lincoln Electric
The main advantage of trading using opposite Eastern and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern 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.| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. Hillman Solutions Corp | Eastern vs. AB SKF |
| Lincoln Electric vs. Kennametal | Lincoln Electric vs. Toro Co | Lincoln Electric vs. Snap On | Lincoln Electric vs. RBC Bearings Incorporated |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |